Directive No. 01/CT-NHNN 2012 on monetary policies and ensuring the banking activity to be safe and efficient in 2012

DIRECTIVE

ON ORGANIZING THE IMPLEMENTATION OF MONETARY POLICIES AND ENSURING THE BANKING ACTIVITY TO BE SAFE AND EFFICIENT IN 2012

In response to the Resolution No. 11/2011/QH3 dated 9 November 2011 of the National Assembly on socio-economic development plan of the year 2012, the Resolution No.21/2011/QH13 dated 26 November 2011 of the National Assembly on questioning and answering questions at Second Session of 8th National Assembly and the Resolution No.01/NQ-CP dated 3 January 2012 of the Government on key solutions for guiding and managing the implementation of socio-economic development plan and state budget estimation of the year 2012, the Governor of State Bank of Vietnam hereby requires units of the State bank and credit institutions, foreign bank s branches (herein after called credit institutions) to well perform targets, tasks of monetary policies and measures for ensuring the safety and efficiency in banking activity in 2012 as follows:

1. Targets and duties:

1.1. To organize the implementation of monetary policies on a tight, careful and flexible manner, harmoniously coordinating with fiscal policies to stabilize the monetary market, ensuring the liquidity of credit institutions; to control growth rate of total means of payment at about 14-16% and of credit at about 15-17%; to lower the interest rate surface at a limit that is corresponding to movements of the macro-economy, flexibly managing the exchange rates according to movements of the market and foreign currency demand- supply; to ensure that the operation of credit institutions to be safe and in compliance with regulation of laws on monetary and banking activities.

1.2. To carry out key duties as provided for in the Official Dispatch No.9899/NHNN-VP dated 28 December 2011 of the State Bank of Vietnam on thoroughly grasping and organizing the implementation of directions of the Prime Minister and directive solutions of the State Bank of Vietnam at the Conference on implementing Banking tasks in 2012.

1.3. To organize and implement the Action Plan on implementing solutions on currency, credit and banking activity as stipulated in the Resolution No.01/NQ-CP dated 3 January 2012 of the Government on key solutions for guiding and managing the implementation of socio-economic development plan and state budget estimation of the year 2012 (to be attached to this Directive).

2. Units at the Head Quarter of the State Bank of Vietnam, within the scope of their functions and duties, to provide advise to the Governor of State Bank on implementing targets, tasks of the year 2012, with more attention to be paid to the following measures:

2.1. To set up and complete the law system on monetary and banking activities in accordance with international practices, standards and Vietnam s conditions, especially completing guiding documents of the Law of State Bank 2010 and Law on Credit Institutions 2010; to build up an Ordinance on amending, supplementing some Articles of the Ordinance on Foreign exchanges; to continue the completion of two projects of Law on Deposit Insurance, Law on Anti-money laundering for submission to the National Assembly for approval in 2012. To improve the quality and reform the way of building up legal documents of the State Bank to be corresponding to the new condition; To review regulations on the management of monetary and banking activities to prevent corruption in the banks system.

2.2. To manage the monetary policies on a tight, careful and flexible manner in order to stabilize the monetary market, ensuring the liquidity of credit institutions, controlling the growth rate of the total means of payment and of credit as per the provided targets, lowering the interest rate surface at a limit that is corresponding to the movements of the macro-economy and monetary market.

2.3. Based on the performance and credit growth ability of credit institutions, to assign the targets of credit growth rate, balance of corporate bonds purchase (except for bonds issued by credit institutions) and outstanding loans from the entrusted fund (including the factor of exchange rate change), to 4 groups of credit institutions: max growth rate for group 1 is 17%, group 2 is 15%, group 3 is 8%, no growth for group 4. After 6 months of implementing, the State Bank of Vietnam shall consider to adjust the target of credit growth for credit institutions in accordance with the movements of the monetary, credit, banking activities, ensuring to meet the targets of monetary policies.

2.4. To implement solutions for facilitating the shift of credit structure towards giving priority to lending to agricultural, rural area, export production, support industries, small and medium enterprises employing more labours, effective projects, plans; to control the proportion of outstanding loans to discouraged sectors at 16% at the maximum as against the total outstanding loans; to implement solutions of controlling credit growth in foreign currency according to the targets of monetary policies and guideline on restraining the dollarization in the economy; to review, amend, supplement mechanisms, policies on credit in accordance with the Law on Credit institutions and the real condition for closely controlling and ensuring the safe credit activities of credit institutions, minimizing potential risks.

2.5. To control the foreign exchange market and manage exchange rate flexibly according to the market signals, in line with the foreign currency demand-supply relation, interest rates, inflation, international payment balance, facilitating to increase the state foreign exchange reserves; to review and complete the system of legal documents on foreign exchange management to attract overseas national currency exchange, foreign investment capital, controlling the use of international payment cards in foreign countries and creating legal bases for individuals, organizations to implement, contributing to stabilization of the domestic foreign exchange market; to co-ordinate with the Ministry of Finance and related agencies to intensify inspecting, supervising tightly in and out capital flows, especially the foreign indirect investment capital, servicing the management of the foreign exchange market. To co-ordinate with Ministries, industries, Provincial People’s Committees under the central Government s management to intensify controlling, inspecting, supervising the foreign exchange market, gold market and strictly handle any act of violation, to resolutely make good the dolarization step by step.

2.6. To draw up and implement a Plan of gold market stabilization through the utilization of domestic resources; to organize the implementation of the Decree for replacing the Decree No.174/1999/ND-CP dated 9 December 1999 of Government on controlling the gold trading activity after being issued by the Government in order to rearrange the gold market, raising the regulation capability of the State Bank of Vietnam and making contribution to the market stability.

2.7. To improve the quality of monetary forecast and statistic works and to strengthen the application of information technology in monetary forecast and statistic works. To focus on constructing a statistic system for the operation of the inter-bank market. To synchronously implement solutions of reinforcing the forecast capacity of the State Bank of Vietnam pursuant to the Plan on “Strengthening and improving quality of macro forecast work” as approved by the Prime Minister at the Decision No. 674/QD-TTg dated 10 May 2011. To strengthen the coordination with Ministries, industries to increase quality of drawing up, analyzing and forecasting the international payment balance. To promote and raise the efficiency of the analysis, forecast of capital inflow and outflow and propose suitable measures.

2.8. To intensify inspecting, supervising the operation of credit institutions to ensure their operation to be safe and in compliance with regulations of laws on monetary and banking activities, strictly dealing with violations; To closely monitor the liquidity changes of the entire system and specific credit institutions, timely detecting any credit institution facing with liquidity difficulty so as to take timely action for settlement. To strengthen supervising the implementation of prudential ratios in operation, giving early warning of any potential system risk; to closely supervise the implementation of credit growth targets and proportion of outstanding loans to discouraged areas by each credit institution; To focus on renewing, increasing quality of banking inspection and supervision towards establishment of mechanism on supervision, checking, inspection, being active in ensuring that all credit institutions operate within the legal framework; combining the inspection, supervision over the implementation of policies, laws on monetary and banking with risk inspection and supervision, strictly handling any act of violation; To gradually implement process of banking system restructure towards being suitable in scale, assets structure and capital resources, reducing the weak banks and credit institutions in a cautious manner, ensuring the stability of the entire system and interests of the legal depositors.

2.9. To draw up and complete a strategy on the development of banking sector to 2020 and a plan on implementation of the strategy on the development of the banking sector to 2020; To well play the role of a representative for the state owner at commercial banks with state-owned capital to orient the strategies and plans for business development, ensuring to improve the efficiency and competitiveness, making contribution to the implementation of the socio-economic development plan.

2.10. To effectively implement the Plan on non-cash payment in Vietnam in the 2011-2015 period as approved at the Decision No.2453/QD-TTg dated 27 December 2011 by Prime Minister; To deploy the expansion of the POS inter-system connection and effectively and firmly develop the card payment via POS; To continue to implement and finish the Plan on establishment of a unified card switching center; To focus on completing the legal documents system on payment activities, setting up mechanisms and policies on supervision of the State Bank with respect to the payment system; To co- ordinate with the Ministry of Public Security in crime prevention, ensuring the safety in payment activities.

2.11. To well perform the role of a representative of the Government at international monetary and financial institutions. To enhance international cooperation in banking sector; to co-ordinate with Ministries, industries in preparing for negotiation, conclusion of programs, projects of capital borrowing with World Bank, Asian Development Bank…; To continue developing and effectively using technical support, policy consultancy and training support from international monetary and financial institutions, bi-lateral and multi-lateral partners; to co-ordinate with related Ministries, industries in building up and implementing the Financial Section Assessment Project (FSAP).

2.12. Flexibly reconcile the cash amount in circulation to meet the demand of the economy in terms of structure, value and ensuring the issue reserves; To intensify measures for preventing counterfeit money, ensuring the vault safety.

2.13. To arrange sufficient resources to actively and effectively participate in the implementation of the Project of Management Information System and modernization of banks, using loan fund from the World Bank to speed up the Project progress, ensuring progress as committed to the sponsor.

2.14. To enhance the information, propagation about guidelines and solutions for management of monetary policies to orient the public opinion, creating the consensus, support from the public opinion to the operation of the entire banking sector; to promote the administration reform, especially controlling the administrative procedure in drawing up, issuing legal documents on monetary and banking activities.

3. State Bank s Branches in provinces, cities under the central Government s management, within the scope of their functions, shall perform targets and duties of 2012 and following measures:

3.1. To timely implement mechanisms, policies on monetary, credit and banking activities in 2012; to catch up with the local socio-economic situation and banking activities to report and propose to the executive committees, local authorities and the Governor of the State Bank on measures for managing the operation and network of credit institutions, to amend mechanisms and policies in conformity with the real situation; To promote the co-ordination and exchange of information between branches and units at the Head quarter of the State Bank of Vietnam.

3.2. To closely supervise the implementation of norms for credit growth norms by credit institutions and branches in the local area so as to ensure not to exceed the target assigned by the State Bank for the whole year of 2012, strengthening the inspection against the implementation of regulations on monetary and banking activities by credit institutions in the local area, and strictly dealing with any act of violation.

3.3. To take appropriate measures for the credit institutions to concentrate their capital for the development of the local economy, especially meeting the demand of capital for agricultural, rural development, power production, exports and for small and medium enterprises.

4. Credit institutions are required to closely follow targets and duties in 2012 and to take following measures:

4.1. To draw up and implement a business plan for 2012 in conformity with solutions for monetary policy, banking activity management of the Government and the State Bank.

To build up a plan for credit growth in 2012 in accordance with provisions of the State Bank of Vietnam, and a relevant report shall be made and sent to the State Bank of Vietnam by the credit institutions. Based on the 2012 plan on credit growth rate, the plan on credit growth rate for specific quarters and the whole year shall be assigned to their branches (Transaction departments), and a copy thereof shall be sent to the State Bank’s branch in province, city where the branch is operating for the purpose of the state management on credit activities in the local area.

4.2. To seriously control the credit growth rate in the whole year of 2012 in line with the maximum credit growth rate provided for by the State Bank of Vietnam; to give priority in capital to agricultural, rural development, export production, support industries, small and medium enterprises employing more labours, effective projects and plans; controlling the proportion of outstanding loans to discouraged areas to be at 16% at the maximum as against the total outstanding loans in the whole year of 2012; to control credit growth rate in foreign currency in correspondence with the ability of capital mobilization and the guideline on dollarization restriction in the economy.

4.3. In the event where the credit institution gains its credit growth rate and/or proportion of outstanding loan to discouraged areas exceed the provided level, the State Bank of Vietnam shall apply a required reserve ratio that is twice (02) as the required reserve ratio applicable to VND deposits and other measures for restricting the business scope.

4.4. To implement solutions for currency, credit, interest rate and other macro-economic policies under the direction of the Government and the State Bank of Vietnam; to comply with provisions of laws on currency, credit and banking activities, to post in public interest rates of mobilization and loans in accordance with provisions of applicable laws.

4.5. To restructure their liabilities and assets, to raise their financial and management capacity; to complete their organizational model, improving the quality of the internal inspection and audit, completing regulatory documents on operation so as to ensure the prudential, efficient operation and sustainable development.

4.6. To supply, on a full, timely and accurate basis, information on business activity in accordance with provisions of applicable laws and upon request by the State Bank of Vietnam; to timely reflect any difficulty, query to the State Bank and State Bank’s branch in province, city under the central Government’s management.

5. Implementation:

5.1. This Directive shall come into effect from its signing date.

5.2. Director of Administrative Department, Director of the Monetary Policy Department and Head of units of the State Bank, General Manager of State Bank’s branches in provinces, cities under the central Government’s management, Chairman of Board of Directors, Chairman of Board of Members and General Director (Director) of credit institutions, foreign bank’s branches shall be responsible for the implementation of this Directive.

APPENDIX

ACTION PLAN OF THE STATE BANK OF VIETNAM
On implementing the Resolution No. 01/NQ-CP of the Government dated 03/01/2012 on key solutions in guiding the implementation of the social development plan

and estimation of state budget in 2012
(Issued in conjunction with the Ordinance No. 01/CT-NHNN dated 13/02/2012)