State Bank of Vietnam Shares Strategy to Address Challenges in the Capital Market

DNHN - According to Deputy Governor Dao Minh Tu, to increase the economy’s capital absorption capacity, the State Bank of Vietnam has innovated a mechanism for managing credit growth in 2024.

In a meeting with press reporters in the early days of the new Lunar New Year 2024, Mr Dao Minh Tu, Permanent Deputy Governor of the State Bank of Vietnam, made important assessments of the situation of Vietnam’s capital market and emphasised the important role of the banking sector in meeting capital demand for the development of business production.

Mr Dao Minh Tu emphasised that in the context of the capital market facing many difficulties, and capital sources mainly depend on bank credit, meeting capital demand for business production is still the top priority of the banking sector. However, he also emphasised that solving the problem of credit growth is not an easy task.

Mr Dao Minh Tu reviewed the challenges and difficulties that credit faced in 2023. In particular, he emphasised the negative impact of the decrease in investment demand, business production and consumption, leading to a decrease in credit demand from people and businesses. He also pointed out the decline in the credit absorption capacity of the real estate market, while real estate credit balance accounted for a high proportion of the total credit balance.

In addition, he also emphasised the difficulties in the capital market, especially due to the violation of regulations by some corporations and enterprises in the issuance and use of bonds, which has eroded investor confidence. This has put great pressure on the monetary market and bank credit capital.

To cope with these difficulties, Mr Dao Minh Tu outlined the solutions that the State Bank has put forward, including innovation in the mechanism for managing credit growth and measures to reduce lending interest rates and cut unnecessary fees, to support businesses and people.

However, he also emphasised that solving the problems in the capital market is not only the responsibility of the banking sector but also requires the synchronous participation of all levels and sectors, to promote economic growth drivers and improve the business environment.

In conclusion, Mr Dao Minh Tu praised the efforts of the banking sector in coping with the challenges in the capital market and emphasised the need for cooperation and coordination between ministries, sectors and businesses to promote the sustainable development of the economy.

The leader of the State Bank assessed the global economic situation in 2024, predicting that it will still face slow growth and many uncertainties. Although inflation has shown signs of peaking, it remains high in many countries, and many central banks continue to maintain a high-interest rate policy. At the same time, global commodity prices also pose many risks of sharp fluctuations.

In the domestic context, economic growth is also facing increasing risks due to declining global demand, which negatively affects the manufacturing and processing industries. At the same time, inflationary pressures still exist and investment and consumption activities face many difficulties. These fluctuations continue to create many challenges and pressures for monetary policy in 2024.

To stabilise the monetary market and support economic growth, the State Bank is committed to continuing to closely monitor economic and monetary developments at home and abroad to proactively, flexibly, promptly and effectively manage monetary policy tools. At the same time, it will coordinate synchronously, harmoniously and closely with fiscal policy and other macroeconomic policies in order to contribute to supporting economic growth at a target of about 6-6.5%, along with stabilising the macroeconomy and controlling inflation at an average target of about 4-4.5%.

Emphasising support for the credit institution system, the State Bank will continue to flexibly and proactively manage open market operations and is ready to support liquidity for credit institutions. At the same time, it will manage interest rates in line with macroeconomic balance, inflation and monetary policy targets, as well as encourage credit institutions to continue to reduce lending interest rates to support businesses to recover and develop production and business.

In the future, the State Bank will continue to allocate additional credit limits to credit institutions if they meet targets and have the capacity to provide additional capital to the economy while still ensuring the quality and safety of the system.

In addition, the banking sector will also continue to implement the Restructuring Plan in conjunction with Bad Debt Handling for the period 2021-2025, to improve the financial and governance capacity of credit institutions, while creating conditions for healthy, public and transparent operations. This is part of the State Bank’s strategy to ensure the safety and stability of the financial system.

Binh Phuong