Banking & Finance

The State Bank of Vietnam (SBV) is implementing solutions to create favorable conditions for businesses and individuals to access bank credit and has set out three goals on monetary policy management in 2022. Interest rates will be adjusted in line with the macro balance, inflation, market movements, and monetary policy objectives, and the network of credit institutions will be restructured in association with bad debt settlement.

Liquidity in the banking system from November 22 to November 26 was continually supported by the volume of VND supplied by the State Bank of Vietnam (SBV) from forward trade purchases. Buying foreign currency to supplement the liquidity of the VND, loosening the credit space, and reducing the ratio of short-term capital for medium and long-term loans are rare activities in monetary easing policy from the SBV.

The Ministry of Finance has proposed that the reduction on the environmental protection tax for jet fuel be changed from the current 30 per cent to 50 per cent from January 1 to the end of 2022. If approved, the 2022 budget would see revenue fall by more than VND1.5 trillion ($66.11 million). The policy will increase the financial capacity of airlines to overcome the difficulties from Covid-19.

It is forecast that Vietnam will attract $18 billion in overseas remittances this year, ranking it eighth in the world and third in the Asia-Pacific region. Thanks to the large volume, supply and demand of foreign currencies will be relatively balanced in the year-end period and help the USD/VND exchange rate remain stable.

A resurgence in banking stocks over recent days helped the VN-Index climb to a new record in hitting 1,500 points. This shows that bad debts rising but kept under control has not affected banking stocks to any great extent and the expansion of credit would take them even higher.

There are three factors helping banks operate effectively, according to the Bank for Investment and Development of Vietnam Securities Company: loosening credit space, increasing the proportion of corporate bonds, and effectively mobilizing current account savings account (CASA) deposits. It is forecast that growth in the banking sector will reach 22.2 per cent next year with a lower profit base compared to 2021.