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Vietnam’s banking restructuring scheme fruitful, with important targets met

Tuesday, December 29, 2015, 15:29 GMT+7

Vietnam’s banking restructuring scheme, launched by the central bank four years ago, has achieved almost all of its important objectives, a senior official of the State Bank of Vietnam (SBV) said at a press conference in Hanoi last week.

Solutions adopted to reduce bad debts have taken effect, helping significantly improve credit quality and lower the ratio of non-performing loans to total outstanding loans, SBV Deputy Governor Nguyen Thi Hong said on Thursday last week.

The conference was held to review the country’s monetary policy and banking operations in 2015 and map out plans and targets for 2016.

According to data compiled by Vietnam’s central bank, about 99.6 percent of banks’ bad debts had been handled as of November 30.

As a result, bad debt in the entire banking system was brought down to 2.72 percent, meeting the target of cutting the rate to less than three percent by the end of 2015, the deputy governor said.

The application of the new standards for the classification of debts, starting in the first quarter of 2015, was also fruitful, putting an end to the system’s two different data types for bad debt, one reported by lending institutions and the other complied by the central bank, Deputy Governor Hong added.

She said that credit growth is estimated to be 18 percent this year, and the rate is projected to hit 18-20 percent next year.

The local banking system has become more stable, as total deposits rose nearly 13.6 percent year on year, offering sufficient credit for lending to the national economy, even though deposit interest rates fell slightly, Hong said.

As of December 21, credit growth had seen a 17.17 percent spike, outperforming that in the same stage recorded in 2011-14.

Deputy Governor Hong said loans had been channeled into many sectors considered priorities by the government early this year, especially the high-tech industry.

In 2015, the central bank has maintained stable policy rates, including interest caps for savings in the Vietnamese dong and the U.S. dollar, she added.

Meanwhile, lending interest dropped 0.3-0.5 percentage points compared to last year, while deposit rates plummeted 0.2-0.5 percentage points year on year.

The SBV official also said foreign exchange and currency markets have continued to be stable with enhanced confidence in the Vietnamese dong and the ‘dollarization’ of the national economy continually declining.

These results showed that 2015 has been a year of success in monetary policy management, as annual inflation has been kept at below one percent, marking the longest inflation stability in a decade, while economic growth reached over 6.5 percent, the highest in the last five years, she said.

The central bank will leverage all of its policy tools flexibly to keep inflation below five percent, ensuring macroeconomic stability and contributing to economic growth at 6.7 percent in 2016, Hong added.

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