Directing cash flow to priority areas, preventing bad debts from increasing

Deputy Governor of the State Bank Dao Minh Tu

In 2022, how will the banking industry implement solutions so that monetary policy continues to support people and businesses affected by Covid-19?

On the basis of results in 2021 and 2022, the State Bank will continue to operate monetary policy in a flexible manner, creating maximum conditions for supporting businesses and liquidity for the economy. In operating monetary policy, banking activities will also closely follow the Government's economic development and recovery programs. On that basis, we will continue to ensure the goal of controlling inflation, stabilizing the macro-economy as well as the value of the currency, ensuring exchange rate stability, while managing the foreign currency and gold markets.

The banking industry will continue to focus capital for businesses, especially those facing difficulties due to Covid-19, directing cash flow into priority areas, focusing on the direction of the Government, creating favorable conditions for businesses to invest in making the most of the resources of economic organizations through credit institutions, to contribute to the implementation of national target programs and preferential credit programs under the current direction of the Government.

With capital needs for the economy, the SBV will manage credit growth for 2022 at about 14%. This is the number set for the operating target, which can also be higher or lower depending on the economy, capital needs and the target that requires controlling inflation in 2022.

In 2021, the target set by the State Bank is about 12%, but in order to ensure capital capacity for businesses and restore the economy, the State Bank has extended credit to banks in the last months of the year. Up to now, the outstanding credit balance could achieve between 13.5-14% growth for 2021.

How will the SBV continue to control cash flow into risky sectors?

With the direction of the Government, the Prime Minister, and the State Bank of Vietnam, continue to follow the policy of creating favorable conditions for cash flow, especially focusing on priority areas, helping to quickly restore the economy. However, the State Bank will continue to strengthen control of cash flow into real estate, securities or participate in issuing bonds of businesses that do not ensure safety.

Particularly in the real estate sector, the banking industry will strengthen the credit flow to the actual demand for housing of the people. But with activities of borrowing capital for speculation, pushing real estate prices up, the risk of a bubble will be strictly controlled. At this point, there may be a phenomenon of revolving cash flow, flowing into stocks and real estate. The State Bank of Vietnam has recognized that it is necessary to have a policy to monitor more closely the cash flow into investment channels, so that the markets can develop in a healthy way.

The pressure of bad debt already exists, can you tell us how the State Bank will handle it in the near future?

In 2021, due to the impact of the pandemic, bad debt has increased. Therefore, in 2022, the SBV has determined that bad debt will be a challenge. The SBV has determined the scale of bad debt in 2022 and the coming years to have appropriate solutions, on the basis of both preventing and controlling bad debts from increasing, but the SBV also needs specific measures, both in terms of the legal corridor and handling competence. Currently, the State Bank is submitting to the Government and the National Assembly to raise Resolution 42 of the National Assembly on piloting bad debt settlement into a law on bad debt handling, so that the work is more convenient and the process is faster.

Thank you Sir!