|Dr. Nguyen Tri Hieu|
Banks’ running out of credit makes it difficult for businesses to access capital. In your opinion, should the SBV loosen the credit room to alleviate this difficulty?
Vietnam’s economy is in a stressful period when inflation pressure is high. Therefore, failure to implement tight monetary policies will lead to many consequences. Meanwhile, businesses are in dire need of capital to restore operations after a long period of being affected by the epidemic, which has posed a significant challenge to the operating policies of the Government and the State Bank.
However, controlling inflation is still a mandatory priority, and the Government cannot relax now. Therefore, monetary policies will be needed to control inflation, including interest rates, rediscount programs, open market operations and reserve requirements. According to current regulations, the required reserve ratio is 3%, which cannot be further reduced because it will put more money into circulation; The SBV’s rediscount method is also rarely used. Meanwhile, open market operations have a limitation in that if the SBV buys a large number of government bonds, it will lead to quantitative easing, while the current context needs to be tightened. Therefore, the only way to loosen interest rates.
In the context of urgently needing capital, businesses face two problems: high-interest rates and the expiration of credit limits because they have to rely heavily on the 14% target of the State Bank. If the limit is increased, it will affect the target of controlling inflation and bring many risks. However, depending on the case, the State Bank may loosen for several units and attach special binding conditions such as prioritizing disbursement to certain fields or subjects.
Regarding interest rates, the SBV may allow banks to raise interest rates. In the current conditions, the increase in interest rates will help control inflation and increase the prudence in lending by banks and the use of loans by enterprises.
In particular, it is necessary to tighten credit in several areas such as securities, resort real estate, and high-end real estate. Specifically, the stock market has grown very strongly in scores and points in the last two years and liquidity. Still, this growth has not brought many benefits to the economy but is speculative. Similarly, luxury and resort real estate do not cater to the vast majority of the population. Therefore, it is necessary to strictly control credit in these segments, instead giving priority to residential real estate, industrial real estate.
The 2% interest rate support package under Decree 31/2022/ND-CP has been implemented for three months, but the results achieved so far are still very limited. What do you think about this issue?
This 2% interest rate support package is not a delicious piece of cake for banks. Because the goal of the package is to support businesses and only target businesses that need support, the interest rate must be low. Therefore, even though the Government will support 2% interest rate, it will also affect the bank’s profit margin. Meanwhile, the bank has to bear many responsibilities in implementing this support package.
In my opinion, the delay in disbursing this support package is mainly due to the regulations on disbursement conditions that businesses cannot meet. Therefore, the SBV needs to have a special policy for this package. In particular, some criteria and conditions for lending may have to be lowered, and there should be a regulation on unsecured lending. In addition, the SBV also needs to offer “carrots” to banks when implementing this support package, for example, to be allowed to expand the credit room but must use a part of the room to disburse this package…
In the context of the corporate bond market being less active, the burden of providing capital for the economy was heavy on the shoulders of the banking industry. In your opinion, what is the solution to balance these capital sources for the economy?
In the long run, corporate bonds are still an important capital mobilization channel for enterprises. However, the legal basis for corporate bonds is still unstable and needs to be improved. In the draft amendments to Decree 153/2020/ND-CP, many reasonable regulations have been added, such as the issuer must clearly disclose information about the issuance purpose, debt repayment source, etc., so bond buyers can control their capital flows. In addition, the draft also stipulates binding conditions for issuers, such as the minimum level of equity, not being merged or acquired, must be rated, etc.
In my opinion, tightening the corporate bond market is necessary to create a foundation for sustainable development in the future. Although the market will only slow down under this impact in the short term, the corporate bond market will quickly return to activity once the legal regulations have been completed. At that time, the capital supply burden of the banking industry will be significantly reduced.