Decision No. 986/QD-TTg dated August 08, 2018 of the Prime Minister on approving the Strategy for development of Vietnam’s banking sector through 2025, with orientations toward 2030

DECISION

Approving the Strategy for development of Vietnam’s banking sector through 2025, with orientations toward 2030^[1]

THE PRIME MINISTER

Pursuant to the June 19, 2015 Law on Organization of the Government;

Pursuant to the June 16, 2010 Law on the State Bank of Vietnam;

Pursuant to the June 16, 2010 Law on Credit Institutions and November 20, 2017 Law Amending and Supplementing a Number of Articles of the Law on Credit Institutions;

At the proposal of the Governor of the State Bank of Vietnam,

DECIDES:

Article 1.To approve the Strategy for development of Vietnam’s banking sector through 2025, with orientations toward 2030, with the following principal contents:

I. VIEWPOINTS AND OBJECTIVES

1. Viewpoints

a/ The monetary and banking system and operation of credit institutions are the lifeblood of the economy and continue to play a crucial role in the financial system of Vietnam. Stabilizing the operation of the credit institution system is key to monetary and financial stability, a precondition for macroeconomic stability and sustainable growth, and must be ensured by means of synchronous and effective coordination of monetary policy and fiscal and other macroeconomic policies, together with the harmonious and balanced development of the banking, securities and insurance sectors.

b/ Improving monetary and banking institutions plays a crucial role in completing the socialist-oriented market economy institutions. The legal framework concerning monetary and banking issues must be consistent with the market principles, ensuring the system safety, soundness and stability, and enhancing transparency, publicity, competitiveness, and conformity with the best international practices;

c/ Credit institutions, of all economic sectors, are treated equally and compete in accordance with law, and operate with autonomy and accountability. Particularly, domestic credit institutions play the leading role in mobilizing and allocating credit capital and providing banking products and services for the national socio-economic development.

d/ The State shall, through the State Bank of Vietnam, create a stable and safe money and banking business environment, encourage fair competition, ensure discipline and supremacy of law and respect for market rules. The State shall intervene primarily with market instruments, or through state financial resources; create every favorable condition for the private sector to develop on the basis of law observance. The State shall intervene with administrative measures directly in the monetary market and banking operations only when there is a risk of instability of the monetary market, threatening the system safety, potentially threatening the macroeconomic stability.

dd/ To promptly grasp opportunities and address challenges from the impact of the industrial revolution in order to orient the operation of the banking sector. To deeply aware that the application of modern science and technology and creative innovation coupled with the development of high-quality human resources are key to the rapid and sustainable development, increasing the competiveness and narrowing the gap in the development level of the banking sector between Vietnam and the region and the world.

2. Objectives

a/ Overall objectives

To modernize the State Bank of Vietnam (below referred to as the State Bank) in the direction of adopting a rational organization model and a synchronous, effective and efficient operation mechanism in line with the socialist-oriented market mechanism, with full legal standing and accountability; to pursue the priority objective of controlling inflation, contributing to macroeconomic stability and promoting sustainable growth; to ensure safety and soundness of the system of credit institutions to play the key role in ensuring financial stability; to play the role as the supervisor of payment systems and as the payment and settlement center for payment systems and financial and monetary transaction systems in the economy.

To develop the system of credit institutions in the direction that domestic credit institutions play the key role; operate in a transparent, competitive, safe, effective and sustainable manner; adopt diversified structures in terms of ownership, size and type; are based on advanced technology and banking management, in line with international practice standards, attain the development level of the top four ASEAN countries by 2025; are dynamic and creative to adapt to the process of liberalization and globalization; meet the increasing demand for financial and banking services of the economy, reaching financial inclusion capability by 2030, ensure that all citizens and enterprises have full and convenient access to quality financial and banking services, contributing positively to sustainable development.

b/ Specific objectives

- To incrementally increase the independence, proactiveness and accountability of the State Bank for the objective of administering monetary policy and controlling inflation at a level compatible with the socio-economic development orientations in each period, supporting macroeconomic stability and promoting the goal of sustainable economic growth.

To gradually reduce the foreign currency credit to total credit ratio, striving for a foreign currency deposits to total payment instruments ratio of under 7.5% by 2020 and 5% by 2030; to proceed to stop lending foreign currency so that by 2030 at the latest Vietnam will basically end the dollarization of the economy.

- To strengthen the institutional capacity and effectiveness and efficiency of banking inspection and supervision by the State Bank; to expand the scope of inspection and supervision to financial groups established after the parent company-subsidiary model in which the parent company is a credit institution; by the end of 2025, banking supervision and supervision will adopt most of the Basel principles of effective banking supervision.

- To promote the development of non-cash payments, and optimize ATM and POS networks. By the end of 2020 and of 2025, the cash to total payment instruments ratio will be under 10% and under 8%, respectively.

- To increase the number of enterprises and people having access to financial and banking services provided by credit institutions. To focus on developing appropriate services for population groups with little or no access to traditional banking services in rural, deep-lying, remote and socio-economic difficulty-hit areas.

- To develop the credit institution system in conformity with socio-economic conditions and the actual state of the system in each period:

In the 2018-2020 period:

+ To further restructure the credit institution system with a focus on basically settling non-performing loans and handling weak credit institutions by appropriate methods under the market mechanism and on the principle of prudence, with a view to guaranteeing the interests of depositors and preserving the system stability and safety; to reduce the number of weak credit institutions so as to achieve a suitable number of credit institutions that healthily operate;

+ To continue improving the financial status and raising the managerial capacity of credit institutions in accordance with law and in conformity with international practices; to step by step address and put an end to the situation of cross-investment, cross-ownership and manipulative and dominating ownership in related credit institutions; to accelerate divestment of commercial banks.

+ By the end of 2020:

Commercial banks will basically have their equity capital according to Basel II standards, of which at least 12 to 15 commercial banks will successfully apply Basel II according to the standard method, and at least one to two commercial bank(s) will be among the top 100 largest banks (in terms of total assets) in Asia;

To raise the proportion of revenues from non-credit services to total revenues of commercial banks to 12-13%; to complete the listing of stocks of joint-stock commercial banks on Vietnam’s stock market; to raise the legal capital level for people’s credit funds;

To reduce on-balance sheet non-performing loan ratios of credit institutions, non-performing loans sold to VAMC and classified debts to under 3% (excluding weak commercial banks for which resolution plans have been approved by the Government).

In the 2021 - 2025 period:

+ To further improve the competitiveness, increase transparency and conform to good international standards and practices in the governance and operation of credit institutions;

+ By the end of 2025:

There will be at least two to three commercial banks in the top 100 largest banks  (in terms of total assets) in Asia and three to five banks listed in foreign stock markets;

All commercial banks will apply Basel II according to the standard method; commercial banks where the State holds dominant shares and joint-stock commercial banks that have good governance and have completed the application of Basel II according to the standard method will implement Basel II according to the advanced method on a pilot basis;

To increase the proportion of revenues from non-credit services to total revenues of commercial banks to 16-17%;

The non-performing loan rate of the entire system of credit institutions will be under 3%.

- To increase the efficiency of allocating credit capital for socio-economic development; to promote the development of “green credit” and “green bank” to contribute to directing the economy toward green growth, low-carbon emissions, adaptation to climate change; to increase the proportion of bank credit capital invested in renewable energy, clean energy, low-carbon production and consumption. To incorporate sustainable development, climate change and green growth issues in credit programs and projects.

- To step by step lift the position of Vietnam at international monetary and banking forums and institutions to serve the banking sector’s development in response to the requirements of international integration.

II. MAJOR TASKS AND SOLUTIONS

1. Perfecting the monetary and banking legal framework on the basis of fully observing the rules of the market economy in conformity with international practices and meeting the requirements of integration

- To review and finalize the Law on the State Bank of Vietnam and relevant regulations on the tasks and powers of the State Bank, ensuring that the State Bank can maintain its independence and initiative in administering monetary policy while playing its role as a government agency, consolidating and enhancing the banking sector’s capability so that after 2020, the banking market will fundamentally operate on the market principles;

- To review and evaluate the impacts and efficiency, thereby amending, supplementing or promulgating regulations relating to monetary stability in the direction of ensuring the implementation of the monetary policy according to the inflation control objectives, effective coordination between monetary policy and fiscal policy and other policies. To administer interest rates in line with macroeconomic, inflation and monetary market developments. To administer the exchange rates flexibly in line with market developments, macroeconomic and monetary balances, and monetary policy objectives;

- To develop a system of standard indicators to assess the stability and safety of the monetary market;

- To review and evaluate the implementation of the 2005 Ordinance on Foreign Exchange and the 2013 Ordinance Amending the Ordinance on Foreign Exchange; on that basis, to further improve the legal framework on foreign exchange management of capital transactions, current transactions and other economic relations involving foreign exchange;

- To complete the legal framework defining the responsibilities of the State Bank in inspecting and supervising financial groups operating after the parent company-subsidiary model in which the parent company is a credit institution; to act as the focal point and coordinate with related agencies in advising the Government on the formulation of a legal framework on financial groups;

- To define the focal role of the State Bank in promoting financial stability; to incorporate into law the finance-stabilizing function of the State Bank and at the same time step by step complete the legal framework for macro-security supervision of the financial system;

- To study the model of integrated supervision of the financial system in conformity with international practices and Vietnam’s realities and report it to the Prime Minister;

- To review, supplement and improve regulations on safety of banking operations, licensing, inspection, supervision and post-inspection and post-supervision handling in conformity with international practices and Vietnam’s realities; to increase publicity and transparency of the governance and operation of credit institutions to meet the requirements of the restructuring of credit institutions in each period;

- To issue a roadmap for Basel II guidance and implementation; to set criteria for classifying and ranking credit institutions, clearly identifying healthy credit institutions, weak credit institutions and credit institutions of system importance; and review and improve the management and monitoring mechanisms appropriate to each type of credit institutions;

- To develop a mechanism to support credit institutions designated to receive and manage weak credit institutions and credit institutions involved in the restructuring process; to set up a system of early warning of risks, mechanisms for handling system crises and dealing with credit institutions vulnerable to high risks, guaranteeing the State Bank’s right to intervene in order to protect the system safety and safety for deposits of the population; to amend and supplement the regulations on intensified handling of cross-ownership, prevention of the abuse of management and governance rights and the right of major shareholders to manipulate activities of credit institutions; to complete the legal framework on merger, consolidation and bankruptcy of credit institutions;

- To study, amend and improve the regulations on foreign investors’ purchase of shares of Vietnamese credit institutions in the direction of increasing foreign investors’ holding rate in each type of credit institution in line with signed international commitments with a view to ensuring the mobilization of capital, technology and governance experience from foreign investors; at the same time, to encourage the participation of foreign investors in the handling of weak credit institutions;

- To amend and supplement a number of articles of the Law on Anti-Money Laundering;

- To study, formulate and promulgate a Law on Payment Systems in order to enhance the management and supervision of payment systems in the economy, ensuring safety and conformity with Vietnam’s realities, based on international standards and practices, and raise the State Bank’s state management of payment activities;

- To improve the institutions and policies, create favorable conditions for credit institutions to provide adequate and diversified financial products and services, particularly non-credit banking products and services and modern products and services based on digital technology, thus meeting the increasing demand of the economy;

- To review, amend, supplement and promulgate legal documents on crypto-currency.

2. Strengthening institutional capacity, elevating the position, autonomy and accountability of the State Bank

a/ To restructure the State Bank’s organization toward streamlining, highly specialized, efficient and effective management and governance:

- To further revise, rearrange, consolidate and reorganize the departments under the head office of the State Bank in order to focus on management and operation of different areas, ensuring smoothness and effectiveness and incremental conformity with international practices and standards;

- To step by step organize the rational and efficient supply of cash, cash counting, sorting, preservation and transport in the banking sector and develop the network of treasury services in the direction of permitting credit institutions or enterprises to provide these services; to raise the responsibility of credit institutions in the management of cash and treasury safety;

- To further strengthen the role of the National Credit Information Center (CIC), improve the quality of personal and business information, support credit institutions to access adequate information to provide services in an effective and safe manner; to strictly implement the roadmap of the approved Scheme on development of the national credit information center up to 2015 with orientations toward 2020; to increase investment and upgrade the information infrastructure so that CIC can become a reliable credit information channel serving the State Bank’s policymaking process and helping credit institutions prevent and limit risks;

- In the 2018-2020 period, the State Bank shall assume the prime responsibility for, and coordinate with related ministries, sectors and localities in, reviewing and assessing the operation efficiency of the State Bank’s provincial/municipal branches. In the 2021-2025 period, to continue reorganizing these branches to be streamlined, effective and efficient, meeting the requirements of administrative reform and financial service provision; after 2025, to form regional State Bank offices.

b/ To enhance the role of the State Bank in monetary and financial stability, increasing its autonomy and accountability. To continue improving the management capacity of the State Bank in conformity with international standards and practices.

c/ To develop and issue a mechanism to clearly define the functions, tasks and powers of the State Bank as the state management agency in the banking sector and the role of the representative of the owner of state capital at credit institutions and enterprises with state capital for which the State Bank acts as the owner representative; to enhance the management and supervision of state capital portions at credit institutions and enterprises with state capital for which the State Bank acts as the owner representative; to improve the mechanism of representatives of state capital portions at commercial banks where the State holds dominant shares and which have state capital, raising the responsibility and performance of representatives’ activities, maintain and ensure the mechanism of exchange of information, reporting and authorization in accordance with law and the operation of credit institutions.

d/ To create a breakthrough in the reform of administrative procedures, focusing on promoting the application of information technology and the modernization of public administrative services to save time and costs of implementing administrative procedures for organizations and individuals.

3. Renovating the monetary policy framework, management of foreign exchange and gold

a/ To direct the monetary policy framework at the primary objectives of controlling inflation, stabilizing the value of the currency, contributing to firmly maintaining macroeconomic stability, facilitating the raising of the efficiency of fund mobilization and allocation in the economy, promoting sustainable economic growth; to increase the independence of the State Bank in administering monetary policy.

To shift the administration of monetary policy incrementally from administration by money amount to mainly administration by price; to use indirect instruments, proceeding to gradually remove administrative measures on interest rates when conditions permit; to continue administering the open market operation as a main instrument to regulate the available capital of credit institutions in order to achieve the monetary policy objective in each period.

b/ To renew the foreign exchange management framework as follows:

- To further implement the floating exchange rate regime with management, administering exchange rates in a more flexible manner, closely following the domestic and international financial market developments and at the same time ensuring compatibility with macro and monetary balances and monetary policy objective in each period. To continue applying measures to increase the soundness and efficiency of the foreign currency market, and the use of derivative instruments to prevent exchange rate risks;

- To renovate the management of the State’s foreign exchange reserves in line with international practices and the size of foreign exchange reserves in each period, ensuring the harmony of the objectives of safety, liquidity and profit. To step up analysis and forecast activities for building the structure, standards and limits of investment of the State’s foreign exchange reserves in conformity with the international and domestic contexts in each period; to form an independent unit under the State Bank to manage foreign exchange reserves investment when the foreign exchange reserves reach a certain level;

- To coordinate monetary policy solutions in order to stabilize the foreign exchange market, strive to step by step increase the size of the State’s foreign exchange reserves suitable to the practical conditions;

- To comprehensively implement measures to substantially eliminate the dollarization of the economy by 2030; to restrict lending in foreign currencies, gradually shifting the foreign-currency fund mobilization and lending relation between credit institutions and customers to the foreign currency trading relation in order to ensure foreign currency liquidity and increase foreign exchange reserves; to implement the Scheme on liberalization of capital transactions in line with the roadmap for the implementation of Vietnam’s international commitments, which was approved under the Prime Minister’s Decision No. 1590/QD-TTg of August 11, 2016.

c/ To renew the framework of gold market management in order to achieve the objective of sustainable development of the gold market, limiting goldalization, supporting the monetary policy administration and stabilizing the macro-economy.

d/ To renovate and improve the quality and effectiveness of monetary statistics, forecast analysis and application of information technology, improve the software program for statistical reporting, analysis and processing, ensuring that data, statistical products, analysis and forecasts are timely, accurate and conformable with international practices and effectively serve direction and administration work; to improve the mechanism of collection and sharing of information within the banking sector, as well as with agencies outside the sector, ensuring policy coordination between the State Bank and the Ministry of Finance, Ministry of Planning and Investment and Ministry of Industry and Trade with a view to creating synchronism and consistency between monetary policy and fiscal policy and other macro policies in the macroeconomic management by the Government.

dd/ To develop a stable and transparent monetary market compatible with the orientation and roadmap for restructuring the financial market, ensuring a proper market structure in harmony with the capital market and insurance market.

- To transparently provide and improve the quality of information to be disclosed in the monetary market so as to improve the confidence of investors and depositors; to build an information system for management of the interbank monetary market operation to support the State Bank’s administration and the demands of credit institutions;

- To improve the quality of financial statements and annual reports of credit institutions, ensuring sufficient and accurate information, including non-financial information such as ownership structure, management and administration work.

4. Developing, managing and supervising important payment systems in the economy

a/ To restructure the interbank e-payment system in a centralized and modern manner, acting as the national backbone payment system, performing the role of the payment center of the State Bank, serving the high-value payment system, interbank multi-currency payment, etc., and connecting to other payment systems in the economy;

b/ To build and develop an automatic e-clearance system for retail payment transactions and card transactions in order to provide electronic switching and e-clearance services through payment instruments and services and various payment channels, making payments in batches and in real-time, operating 24/7, serving a wide range of customers;

c/ To improve the internal payment system of banks, ensuring smooth connection and automation when connecting with the automatic e-clearance system for retail payment transactions and the interbank electronic payment system of the State Bank, aiming to meet payment needs of various customers such as credit institutions, enterprises, individuals and governmental agencies;

d/ To improve the supervisory function of the State Bank for important payment systems in the economy in conformity with the supervision standards according to the principles set by the Bank for International  Settlements (BIS) and the International Organization of Securities Commissions (IOSCO), ensuring that national payment systems operate safely, efficiently and smoothly; to effectively supervise cross-border payment and international payment; to supervise the supply of new payment instruments and services; to study and formulate a strategy for development of payment and settlement systems by 2025, with orientations toward 2030;

dd/ To formulate and promulgate a strategy for development of Vietnam National Payment Joint-Stock Company through 2025, with orientations toward 2030.

5. Raising the efficiency and effectiveness of the banking inspection and supervision system in conformity with international practices and standards

a/ To finalize the organizational model of the banking inspection and supervision agency according to the roadmap for renewal of the organizational model and operation mechanism of the State Bank:

- To improve and renovate the organizational model of banking supervision and inspection in the direction of: ensuring the uniform direction of inspection and supervision activities by the banking inspection and supervision agency over local banking inspection and supervision units, avoid overlapping or omission of tasks; to develop decentralization and assignment mechanisms to determine responsibilities clearly and transparently, mechanisms of coordination and sharing of information, reporting, direction and management processes within the banking inspection and supervision agency as well as between the banking inspection and supervision agency and units of the State Bank; to form units under the banking inspection and supervision agency to manage, inspect and supervise operations of credit institutions of system importance and specialized units to advise the Governor of the State Bank on the state management of the operation of the system of credit institutions being cooperatives;

- To strengthen the coordination and information sharing between the banking inspection and supervision agency and law enforcement agencies as well as related agencies in the inspection and supervision of the financial system to ensure a safe and stable financial system.

b/ To renew inspection and supervision methods:

- To further renew inspection work in the direction of fast and drastic shift from compliance inspection to risk-based inspection, closely linked to risk-based supervision, and step by step applied uniformly in the entire system of credit institutions and foreign bank branches; to intensify comprehensive inspection of credit institutions;

- To continue renovating supervision work in the direction of improving the effectiveness of micro-safety supervision and macro-safety supervision based on the implementation of new risk supervision tools and methods associated with stepping up the application of information technology; to raise the State Bank’s early warning capability for system risks and preventing the risk of breaching the banking legislation by credit institutions and foreign bank branches; to closely coordinate the supervision with the inspection, licensing and promulgation of regimes and policies.

c/ To increase investment in technologies in support of banking inspection and supervision work.

d/ To develop a staff control mechanism at the same time with an appropriate staff protection mechanism in order to limit legal risks for banking inspectors and supervisors.

dd/ To raise the quality of inspecting and supervising financial groups established after the parent company-subsidiary model in which the parent company is a credit institution; to control the interconnection between credit institutions and financial institutions within the scope of inspection and supervision by the State Bank.

6. Developing modern banking products and services, creating a basis for improving access to banking services

a/ To diversify banking service provision channels:

- To rationally expand the traditional channel network in combination with strongly developing modern banking transaction channels (e-banking, mobile banking, internet banking, etc.) through the application of technical advances;

- To further develop and rationally arrange the network of ATMs and POSs nationwide to ensure efficiency and better meet the market demand; to encourage banks and other organizations to invest in and expand ATM networks to rural areas inaccessible to banking transaction points; to study and apply some modern ATMs; to make and implement a plan to develop bank card payment through card acceptance devices in the 2018-2020 period;

- To encourage cooperation in fair competition between banks and financial technology organizations (Fintech), non-bank institutions, microfinance institutions and the people’s credit fund system to develop agency networks for banks at low cost; to create a favorable legal environment for the development of safe and efficient financial technology organizations; to issue standards for connection among credit institutions and between credit institutions and financial technology organizations;

- To adopt policies to expand cash access points and new payment forms, which are modern, convenient, reasonably priced, easy to use, and suitable to a wide range of people, particularly people in rural, deep-lying, remote and economically difficult areas, using the existing network of credit institutions, the postal network and the network of intermediary payment service providers, and some other non-bank institutions.

b/ To improve the quality of and diversifying banking products and services:

- To improve the quality of products and services in the direction of improving the service attitude, renewing processes and procedures, and intensifying the application of information technology to reduce time and costs, better meeting the needs of clients in accordance with law, contributing to boosting the production and business development;

- To attach importance to developing banking products and services on the basis of modern information technology, capable of meeting the needs of those who have not yet been or have been seldom served by banks; to develop flexible microfinance products with a simple structure that is easy to understand and able to meet the needs of the overwhelming majority of people, particularly people in rural, remote and deep-lying areas and areas facing socio-economic difficulties; to develop products and services for commercial credit and credit for value-chain enterprises;

- To develop more value-added services on the banking service provision channel from bank cards; to develop the standard of domestic chip cards and implement the plan on conversion of magnetic cards into chip cards in Vietnam according to an appropriate roadmap to ensure security and safety in card payment, facilitating connection with other payment systems;

- To continue investing in infrastructure, strongly develop electronic payment methods such as online banking, Internet banking, mobile banking, contactless payment and contactless payment acceptance, contactless payment on mobile phones, payment via QR code, tokenization, etc.; to apply new and advanced security measures and standards in line with international payment trends, ensuring prompt, secure, safe, convenient and reasonably priced payment.

c/ To develop e-payment for e-commerce in the direction of improving and enhancing the connection between the e-payment infrastructure of the banking system and the payment infrastructure of units in order to better satisfy the demand for e-payment in e-commerce, at retail outlets, and online payment of goods and service invoices;

d/ To formulate and implement a national financial inclusion strategy;

dd/ To implement green banking activities through increasing awareness and responsibility of the banking sector for the environment and society in business; to strengthen the capacity of credit institutions to develop products that mobilize and lend credit for renewable energy, clean energy, and low-carbon production and consumption activities, contributing to environmental protection and improving the use efficiency of resources and energy.

7. To develop a system of credit institutions capable of competing on the domestic market, step by step raising their international competitiveness.

a/ For commercial banks, non-bank credit institutions (finance companies, consumer finance companies and financial leasing companies):

In the 2018-2020 period:

- To strengthen and raise financial capacity: To increase capital and improve the quality of equity capital of commercial banks and non-bank credit institutions, ensuring that their charter capital is not lower than the legal capital and meet the minimum capital adequacy ratio prescribed by law and international standards; to actively and proactively implement synchronous and drastic measures to control credit quality, reduce non-performing loans and raise the quality of assets;

- To strongly transform the business model of commercial banks from “monoculture of credit” to diversification of non-credit banking products and services; to improve specialization and professionalism in providing e-banking products and services; to increase export of financial services; to continue reviewing and consolidating key business activities; to divest capital already invested outside the sector, in non-financial fields involving many risks; to prioritize grant of credit for important, key sectors and fields of the economy, contributing to accelerating the economic restructuring;

- To improve governance capacity and transparency in credit institutions’ operations: to improve and apply the risk management system in line with the Basel Committee’s principles and standards and the roadmap of application of Basel II in Vietnam; to improve and apply regulations on banking management in line with international practices; to develop a contingent of banking managers and staff with high professional qualifications, sense of law observance, good ethics and sense of responsibility; to diversify the shareholder structure; to request credit institutions to publicly, transparently and accurately disclose information on their business strategies, ownership, financial status, management structure, risk management and corporate governance in accordance with law and in conformity with international practices;

- To modernize the information technology system and internal payment system of commercial banks; to upgrade the core banking system in line with the size, complexity of operations, and management and administration requirements of credit institutions; to increase the application of information technology to the operation and management, analysis and prevention of risks; at the same time to invest in and take appropriate measures to ensure the security of information technology;

- State-owned commercial banks will play the key, leading role in terms of scale, market share and ability to regulate the market; take the lead in the application of modern banking technology and advanced management capability and proactive international integration; and actively participate in the restructuring of weak credit institutions under the direction of the State Bank.

State-owned commercial banks (excluding Vietnam Bank for Agriculture and Rural Development) will increase of their charter capital to ensure capital adequacy ratios according to Basel II standards, ensuring the dominant role of the State in state-owned commercial banks, in which the State will hold at least 65% of total voting shares; select strategic shareholders with prestige in the market, financial capacity and management experience; prepare the prerequisites and proceed to listing stocks on the foreign securities market.

Vietnam Bank for Agriculture and Rural Development will play a leading role in agricultural and rural credit; restructure itself after the model of multi-functional commercial bank; carry out equitization at an appropriate time and ensure that the State holds at least 65% of its charter capital;

- To further strengthen, rectify and restructure joint-stock commercial banks and non-bank credit institutions so as to make them sound and financially capable in terms of scale, quality and effectiveness, ensuring system safety; to operate under the market mechanism, openly and transparently and fully meet the standards on banking management and safety in accordance with law and up to international practices;

- To encourage and create conditions for healthy credit institutions or potential foreign investors to participate in restructuring weak joint-stock commercial banks and non-bank credit institutions; to step up the acquisition and merger on a voluntary basis among credit institutions to form larger institutions with better governance;

- To continue creating favorable conditions for foreign credit institutions to conduct business activities and compete on an equal footing with Vietnamese ones; to encourage foreign credit institutions to participate in the provision of support to and handling of problems and weaknesses of local credit institutions; to encourage foreign credit institutions to take the lead in developing and applying modern technologies and bringing new products and services to the Vietnamese market; to assist local credit institutions in accessing new processes, products and technologies to meet the customers’ increasingly diversified needs for products and services.

In the 2021-2025 period:

- To comply with international standards and practices in the governance and operation of credit institutions at a higher level; to continue improving and implementing healthy internal policies and procedures; to review, evaluate, add and modify advanced management and administration modes based on international standards and practices and in accordance with Vietnamese law; to review the implementation of Basel II according to the standard method; to apply Basel II by the advanced method in the system of commercial banks according to the roadmap issued by the State Bank;

- To continue modernizing the technology system, intensify the application of information technology to the operation and management, analysis and prevention of risks; to continue investing in and take appropriate measures to ensure the security of information technology;

- To continue applying measures to diversify shareholder structure, creating conditions for the formation of large banks of importance in the system and in the region;

- Credit institutions will take the initiative in developing/adjusting their business strategies to be suitable to the new stage, developing a clear service development strategy, with a focus on the development of modern service provision channels and the application of digital technologies; to diversify banking products and services, strongly develop non-credit service channels in order to increase the proportion of non-credit service revenues and commit to actively and efficiently participating in the implementation of financial inclusion;

- State-owned commercial banks will continue to play the role of the key, leading force in terms of scale, market share and market regulation ability; take the lead in applying Basel II by the advanced method for international integration; ensure the rate of state ownership at 51%; list stocks on the foreign securities markets (particularly, Vietnam Bank for Agriculture and Rural Development will list its stocks on the domestic securities market);

- Joint-stock commercial banks will meet capital, database and human resource conditions for the full application of Basel II by the standard method; select joint-stock commercial banks that have successfully applied Basel II by the standard method and have good governance to apply on a pilot basis Basel II by the advanced method. Qualified joint-stock commercial banks will be encouraged to list on the foreign securities market;

- To develop diversified forms of non-bank credit institutions in conformity with international practices and Vietnamese practices;

- Foreign credit institutions will continue to be pioneers in developing banking services, creating a competitive environment, contributing to the development of domestic credit institutions.

b/ For credit institutions being cooperatives and microfinance institutions:

- For credit institutions being cooperatives:

+ In the 2018-2020 period:

For cooperative banks: To raise their role and responsibility in regulating the capital, examining and supervising the clients’ use of loans and loan repayment ability; to provide guidance and training in banking operations and information technology, and support banking activities for member people’s credit funds; to participate in the handling of member people’s credit funds that face difficulties or show signs of having unsafe operations;

For people’s credit funds: To continue rectifying and strengthening comprehensively the finance, management and operation of existing people’s credit funds in parallel with steadily establishing new ones in the countryside. The main scope of activities of people’s credit funds will be to mobilize capital and provide loans to members in their localities, especially in rural areas, in order to mobilize local resources to contribute to developing the local economy, reducing hunger, eliminating poverty, and repelling usury. To ensure that people’s credit funds operate on the principles of voluntariness, autonomy and self-responsibility for their operation results, for the main purpose of mutual assistance among members. People’s credit funds shall operate in accordance with the Law on Credit Institutions and Law on Cooperatives. To formulate and implement a scheme on consolidation and development of the people’s credit fund system up to 2020, with orientations toward 2030, with a view to ensuring that people’s credit funds operate safely, efficiently and sustainably; to gradually build the system of credit institutions being cooperatives into one of the cornerstones of monetary, credit and banking activities in agriculture and rural areas.

For the People’s Credit Funds Association: To strengthen and improve the organization and operation of the People’s Credit Funds Association in order to meet the requirements of the functions of linking the system of people’s credit funds, representing the rights and interests of and setting the general development orientation for people’s credit funds. At the same time, the Association will coordinate with the cooperative bank in training personnel of people’s credit funds and setting up an independent auditing body for people’s credit funds in accordance with law.

+ In the 2021-2025 period:

For the cooperative bank: To complete the establishment of the cooperative bank into a bank of all people’s credit funds with the primary purpose of linking and ensuring the safety of the system through providing financial support for and supervising the operation of people’s credit funds. Its main activities will be regulating capital, carrying out banking operations and managing the operation of the Fund to ensure system safety for member people’s credit funds. To study and build an independent credit evaluation center to help improve the credit quality of member people’s credit funds.

For people’s credit funds: To continue applying solutions to ensure that people’s credit funds operate strictly according to the guidelines, purposes and principles of credit institutions being cooperatives, with increased mutual support and alignment between members; to focus on the objectives of supporting the development of production and service provision and improving their members’ living standards, serving the community in their localities; to continue improving the structure, administration apparatus, investment in physical foundations, and the information technology system, diversify and modernize products and services in conformity with international practices  and the particular characteristics of credit institution being cooperatives in order to better serve their members, study and establish the link among people’s credit funds of various trades, between people’s credit funds of various trades and other people’s credit funds, and between people’s credit funds of various trades and the cooperative bank.

For the People’s Credit Funds Association: To improve the organization and operation model of the People’s Credit Funds Association so as to coordinate with the cooperative bank in properly performing the function of coordinating and linking the system of credit institutions being cooperatives with member people’s credit funds, contributing to supporting and ensuring the stable operation and safe and sustainable development of the people’s credit fund system.

- For microfinance institutions:

+ In the 2018-2020 period: To build and develop a safe and strong market-oriented microfinance system; to ensure access to quality financial services for micro-enterprises, poor households and low-income earners; to increase economic development opportunities for people; to implement the policy of the Party and State on ensuring social security and sustainable poverty reduction; to synchronously implement the Scheme on “Building and developing a microfinance system in Vietnam through 2020” approved by the Prime Minister in Decision No. 2195/QD-TTg of December 6, 2011; to facilitate the establishment and operation of microfinance institutions and microfinance programs and projects, and adopt a management and monitoring mechanism appropriate to the specific nature of micro-financial activities; to formulate specific policies to facilitate the linkage of the operations of credit institutions and microfinance institutions.

+ In the 2021-2025 period: To continue introducing mechanisms to encourage and support the development of microfinance institutions, increase the number of microfinance institutions so as to increase customer service access and support the implementation of the National Financial Inclusion Strategy.

8. Improving the models of other financial institutions operating in the banking sector

a/ For the Bank for Social Policies:

- To focus on concentrating the function of policy credit provision from commercial banks in the Bank for Social Policies; to develop the Bank for Social Policies into an autonomous and stable and long-term development institution while maintaining its role as a public financial institution to implement the social policies of the Government; to focus on areas where financial institutions operating under market principles cannot fill up or only partially fill up;

- In the 2018-2020 period: To effectively implement the objectives, tasks and solutions for the implementation of the Strategy for development of the Bank for Social Policies in the 2011-2020 period approved by the Prime Minister in Decision No. 852/QD-TTg of July 10, 2012;

- On the basis of summarizing and evaluating results of the implementation of the Strategy for development of the Bank for Social Policies in the 2011-2020 period, to study and formulate a development strategy for the period of 2021-2030, then submit it to the Prime Minister for approval.

b/ For VAMC:

To develop VAMC into a center for resolution of non-performing loans in association with restructuring of the credit institution system, promoting the development of the debt trading market, ensuring the safe and sustainable development of credit institutions, having sufficient capacity and resources to perform the functions and tasks of buying, selling and resolving non-performing loans, and valuating and auctioning assets.

c/ For Vietnam Deposit Insurance:

- To develop Vietnam Deposit Insurance into a single-member limited liability company with 100% of charter capital owned by the State and the State Bank of Vietnam being the owner representative; to fulfill the objectives of protecting the lawful rights and interests of depositors, contributing to maintaining the stability of the credit institution system, ensuring the safe and sound development of banking activities;

- To strengthen financial capacity, enhance operational capacity, improve the organizational model, raise the qualifications of staff, apply modern technology to properly perform the supervision and inspection tasks and participate in the special control, detection and early warning of potential risks to organizations covered by deposit insurance; to participate in the effective restructuring of weak credit institutions; to calculate and collect deposit insurance premiums, manage investment capital sources, disseminate deposit insurance policies, pay insurance in conformity with international practices and Vietnamese law;

- To formulate and implement a Strategy for Deposit Insurance Development through 2025, with orientations toward 2030.

9. Attaching importance to the development, application of science and technology and development of human resources of the banking sector

a/ To access the application of science and technology, to promote deep awareness about the impact of the 4^thindustrial revolution on the direction of banking sector reform:

- To continue stepping up the renewal and application of modern technologies through promoting the application of information technology to the management and administration processes of both the State Bank and credit institution system;

- To intensify measures to ensure the safety of the credit institution system, including stepping up the construction of a Disaster Recovery Center; to intensify measures to ensure security and safety for the interbank electronic payment system; to increase regulations and measures to ensure security, safety and confidentiality in card payment, ATM, POS and hi-tech payment methods; to carefully supervise the cash flow arising from cross-border and international payment activities;

- To further improve the legal framework for the development of new technology services, new payment instruments and operation of new service providers, thereby meeting the management requirements in the context of the 4^thindustrial revolution; to establish clear mechanisms and legal frameworks to allow the formation of institutions clearing payment transactions on the principle of competition, creating a basis for wider payment and improvement of payment service quality;

- To develop the strategy for development of the information technology system and network safety and security of the banking system through 2025, with orientations toward 2030.

b/ To attach importance to science and technology development:

- To increase the autonomy of science and technology organizations as well as research and training organizations in the sector;

- To increase investment in science and technology of the banking sector; to attach importance to the quality of scientific research and science management, intensify applied scientific research;

- To promote innovation and improvement; to expand cooperation activities, set up credit institutions’ financial support fund for scientific research activities of the sector; to associate scientific research activities with practice in order to provide scientific grounds for the development of strategy, master plans and plans on banking operations and business.

c/ To attach importance to development of human resources for the banking sector:

- To develop professional standards and apply practice certificates to some key positions in the banking sector; to strongly renew personnel work;

- To increase the cooperation between training institutions and employers in the banking sector;

- To attach importance to training high-quality human resources to meet the development requirements of the banking sector and international economic integration, especially leaders and leading experts of the sector so as to reach the regional and international levels; to train specialists in various areas of the banking sector such as monetary policy, foreign exchange reserve management, payment, banking inspection and supervision, analysis and forecast, risk management, etc.;

- To train banking staffs to apply scientific and technological advances to the sector’s practical activities; at the same time to equip and train existing staffs in new skills, ensuring that professional officers of the State Bank are capable of applying information technology, advanced working methods, proposing and advising on policy making, performing the state management of monetary, credit and banking activities in response to the demands of the economy in the context of deep and wide international economic integration and strong development of science and technology; to enhance the autonomy and responsibility of individuals; to build up a contingent of information technology staffs of credit institutions with good professional qualifications and high professionalism to meet the requirements of management, operation and command of modern technological systems;

- To intensify cooperation and make the best use of technical support and technology transfer and in-depth training of international organizations such as the World Bank, International Monetary Fund, Japan International Cooperation Agency, Asian Development Bank, central banks of developed countries, etc., in order to raise the professional qualifications, experiences and skills of the sector’s officials, civil servants, public employees and managerial staffs;

- To study and develop a strategy for development of human resources for the banking sector through 2025, with orientations toward 2030.

10. Intensifying international cooperation and promoting the process of international integration in the banking sector

a/ To continue implementing the action programs of the Government and State Bank in implementing the Party’s and State’s resolutions on international economic integration. To coordinate with related ministries and agencies in efficiently implementing Resolution No. 06-NQ/TW on the effective implementation of the international economic integration process and firm maintenance of socio-political stability in the context of Vietnam joining the new free trade agreements.

b/ To continue implementing the commitments in the finance and banking fields within the framework of signed free trade agreements.

c/ To further expand multilateral international cooperation, widen and deepen activities within the framework of ASEAN, ASEAN+3, SEACEN, ASEM, APEC, and financial-banking and financial inclusion forums, etc.; to maintain, develop and strengthen bilateral cooperation with the central banks, monetary/ banking management agencies of the countries in the region and the world; to actively participate in bilateral cooperation forums of the governments (joint/intergovernmental committees) to promote cooperation in the banking sector, thus facilitating trade and investment between Vietnam and its partners; to improve the effectiveness and deepen relationships with traditional partners and expand relationships with new partners in order to enhance the effectiveness of external relations in the banking field.

d/ To intensify the relationship and enhance the position and voice of Vietnam and the State Bank in international financial and monetary institutions, regional and global forums and international partners through effectively playing the role of a representative of the State and the Government of Vietnam, and elevating Vietnam’s relationship with international monetary and banking institutions; to actively participate in activities, policy making, initiatives, capital raising programs, restructuring and reform of international monetary and banking institutions with a view to enhancing Vietnam’s position.

dd/ To mobilize to the utmost and efficiently use financial and technical resources from international partners for the socio-economic development of Vietnam in general and of banks in particular; to proactively seek new partners, participate in regional and international financial and monetary institutions and forums in order to increase financial and technical resources for national development.

e/ To take the initiative in obtaining and sharing information with international financial and monetary institutions and central banks of other countries in order to take timely measures to cope with global financial difficulties and risks.

g/ To develop international integration capacity, prepare human, technical and management resources up to international standards in order to prepare qualified officials for nomination, recommendation and introduction to work in international organizations.

11. Enhancing and improving the effectiveness of the State Bank’s communications work

To develop the State Bank’s communications plan in each period, contributing to the transparency of the policy implementation process, raising public awareness and increasing public confidence in the banking system.

III. SOME PROJECTS, COMPONENT STRATEGIES, SCHEMES AND IMPLEMENTATION ROADMAPS

Together with the component strategies and schemes already issued, the State Bank shall focus on formulating and implementing the following laws, component strategies and schemes:

1. To formulate and submit to competent authorities draft laws, component strategies and schemes (see details in the Appendix to this Decision)

a/ In the 2018-2020 period:

- The Law Amending and Supplementing the Law on Credit Institutions (provisions on financial groups).

- Group of component strategies:

(1) Strategy for development of deposit insurance through 2025, with orientations toward 2030;

(2) National financial inclusion strategy.

- Group of schemes:

(1) Scheme on measures to limit the goldalization in the economy in order to convert gold resources into money for socio-economic development in the 2018-2020 period;

(2) Scheme to limit the dollarization in the economy through 2020, with orientations toward 2030;

(3) Framework scheme on the preparation of resources, appointment and nomination of representatives to participate in the study, work, secondment and exchange of officials at international financial and banking institutions, in the 2018 - 2020 and 2020 - 2030 periods;

b/ In the 2021-2025 period: To formulate and implement three laws, specifically:

(1) Law of Payment Systems;

(2) Law Amending and Supplementing a Number of Articles of the Law on Deposit Insurance;

(3) Law Amending and Supplementing a Number of Articles of the Law on the State Bank of Vietnam.

2. Schemes falling under the approving competence of the State Bank Governor

Based on the tasks and solutions set out in this Strategy, the State Bank shall take the initiative in concretizing other relevant schemes falling under the approving competence of the State Bank Governor in the Program of Action of the banking sector, and organize the implementation to achieve the set objectives.

Article 2.Organization of implementation

1. The State Bank shall assume the prime responsibility for, and coordinate with related ministries, sectors and agencies in:

a/ To formulate action programs for the implementation of the Strategy’s contents in each period.

b/ To guide, inspect, supervise and evaluate the implementation of the Strategy and annually report it to the Prime Minister; to organize preliminary reviews (by 2020 and 2025) and the final review (by 2030) to draw experiences of implementing the tasks, solutions and objectives of the Strategy in each period.

c/ To coordinate with the Ministry of Finance and Ministry of Planning and Investment in formulating and submitting to the Prime Minister plans on raising charter capital of commercial banks where the State holds over 50% of their charter capital up to 2020, with a view to fully meet capital standards of Basel II.

d/ To coordinate with the Ministry of Justice and related ministries and sectors in formulating and promulgating the Law Amending and Supplementing the Law on the State Bank of Vietnam; the Law on Financial Groups; and the Law on Payment Systems.

dd/ To coordinate with the Ministry of Finance and related ministries and sectors in creating mechanisms for coordination and sharing of information in the supervision of credit institutions’ operations and supervision of the financial system.

e/ To advise and propose to the Prime Minister for decision adjustments to the objectives and contents of the Strategy when necessary.

2. The Ministry of Planning and Investment shall assume the prime responsibility for, and coordinate with the Ministry of Finance in, allocating resources for the implementation of the Strategy in accordance with the Law on the State Budget.

3. The Ministry of Finance shall assume the prime responsibility for, and coordinate with ministries, sectors and managing agencies of state enterprises and related credit institutions, in:

a/ Working with the State Bank of Vietnam and Ministry of Planning and Investment in balancing and allocating sources to increase charter capital of state-owned commercial banks under the plan on raising charter capital of state-owned commercial banks through 2020 already approved by the Prime Minister.

b/ Studying and improving the legal framework on debt trading by enterprises; legal framework on the formation, development and management of the debt trading market.

c/ Working with ministries, sectors and localities in studying and building a roadmap and allocating sources for dealing with bad debts related to construction capital originating from the central and local budgets, bad debts from lending activities under the programs and projects, designation by the Government and the Prime Minister, and debts guaranteed by the Government.

d/ Working with the ministries, sectors, the State Bank, managing agencies of the state enterprises and related credit institutions in elaborating plans on the thorough handling of bad debts of state enterprises.

dd/ Studying and formulating a legal framework for the securitization of debts, contributing to creating legal grounds for the implementation of transactions on the securities market and converting bad debts into securities for public and transparent transactions at appropriate time.

e/ Drafting legal documents on the competence and responsibility of related units in the formulation of fiscal policy, public debt management and other macro policies.

g/ Working with the State Bank in linking the securities settlement system with the interbank electronic payment system and settling interbank securities transactions at the State Bank.

4. The Ministry of Natural Resources and Environment shall assume the prime responsibility for studying and amending the provisions of the Land Law so as to remove difficulties in receiving as mortgage land use rights of organizations other than credit institutions.

5. The Ministry of Information and Communications shall assume the prime responsibility for, and coordinate with the State Bank, the People’s Committees of provinces and centrally run cities, related ministries, agencies and organizations in, preparing and implementing a plan on information and communication on the banking sector development strategy through 2025, with orientations toward 2030; and disseminating monetary policies and banking activities.

6. The People’s Committees of provinces and centrally run cities shall, within the ambit of their functions, tasks and powers, coordinate with the State Bank in the implementation of this Strategy; ensure uniformity and synchrony in the implementation of socio-economic development plans of the banking sector and localities.

Article 3.This Decision takes effect on the date of its signing.

Article 4.The Governor of the State Bank of Vietnam, ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees, and chairpersons of the Boards of Directors and directors general of credit institutions shall implement this Decision.-

Prime Minister
NGUYEN XUAN PHUC

* The Appendix to this Decision is not translated.