Banks are having to 'treat excess money'

The bank is holding a huge amount of money.

Regarding the situation of banks having excess money but having difficulty lending, on September 7, Deputy Prime Minister Le Minh Khai chaired a meeting on solutions to improve the efficiency of businesses' access to credit capital and increase the economy's ability to absorb capital.

Phó thống đốc Đào Minh Tú: ngân hàng đang phải "chữa bệnh thừa tiền" - Ảnh 1. — State Bank's Permanent Deputy Governor Dao Minh Tu talks about the situation where banks have excess money but cannot lend it out.

Reporting at the meeting, Deputy Governor of the State Bank of Vietnam Dao Minh Tu said that monetary policy management has never been as difficult as it is now. Mr. Tu likened that the entire banking system is having to "treat the disease of excess money". Just like businesses with inventory of goods, commercial banks are also having inventory of money.

The State Bank, together with the entire credit system, always reviews and improves credit granting activities; increases access to credit in the real estate sector and key agricultural products; issues policies to restructure debt repayment terms and maintain debt groups; implements interest rate support policies; reduces lending rates... However, businesses cannot absorb capital and do not want to borrow, so banks have money in stock.

Mr. Tu said that as of August 29, economic credit reached about 12.56 million billion VND, an increase of 5.33% compared to the end of 2022 (same period in 2022 increased by 9.87%). In the past 3 years, credit of the whole system increased by an average of about 1 million billion VND/year.

In fact, the banking system's credit turnover to the economy in previous years was many times larger. Specifically, in 2021 it was 17.4 million billion VND; in 2022 it was 19.7 million billion VND; in the first 6 months of this year it was nearly 10.2 million billion VND.

4 groups of solutions to improve the efficiency of businesses' access to capital

According to the State Bank's leader, in recent times, in the context of other capital mobilization channels not really being effective, especially the capital market having some problems causing capital demand for economic recovery to be concentrated mainly through bank credit channels, Vietnam's credit/GDP ratio has tended to increase rapidly, especially since 2020.

Although there are signs of slowing growth in 2022, it is still on an upward trend, posing potential risks for credit institutions.

Phó thống đốc Đào Minh Tú: ngân hàng đang phải "chữa bệnh thừa tiền" - Ảnh 2. — Many representatives of bank leaders and economic experts attended the meeting to discuss solutions to increase capital absorption capacity.

In the context of excess liquidity in the credit institution system and still having a lot of room for credit growth (the whole system still has about 9% for credit growth, equivalent to about 1 million billion VND), lending interest rates tend to decrease, thereby creating favorable conditions for credit institutions to supply credit capital to the economy.

Therefore, the State Bank affirmed that the low credit growth in recent times was not due to the liquidity of the banking system.

According to the State Bank, the credit growth rate of the whole system is still low compared to the same period of previous years, mainly due to objective factors such as the impact of investment, production, business, and consumption. Some customer groups have demand but do not meet the conditions for loans; the impact of the capital absorption capacity of the real estate group...

Besides, the implementation of some credit programs (120,000 billion VND package; interest rate support program) also encountered difficulties.

According to the State Bank, in the context of excess liquidity in the credit institution system and a lot of room for credit growth, implementing solutions to increase the capital absorption capacity of people and businesses is very necessary for credit institutions to have conditions to supply capital, expand credit to the economy, and meet growth needs.

To improve the efficiency of businesses' access to credit capital and increase the economy's ability to access capital, the State Bank has proposed four groups of solutions: stimulating investment and consumption, promoting economic growth drivers; developing various types of markets (corporate bonds, real estate); improving the capacity and ability of businesses to absorb capital; currency, credit, and interest rates.

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