Governor Nguyen Thi Hong gives latest information on handling weak banks

Governor Nguyen Thi Hong stated that dealing with weak banks is very difficult, takes time and is still in the process of being completed.

Governor Nguyen Thi Hong - Photo: GIA HAN

From now until the end of the year, bank credit will continue to increase.

Explaining further at the meeting of the National Assembly Standing Committee on the morning of October 16, State Bank Governor Nguyen Thi Hong said that credit increased by 5.33% as of September 21 and by the end of September increased by nearly 7%.

Ms. Hong said that with the current drastic management of the Government and ministries and branches to remove difficulties and obstacles, credit will continue to increase from now until the end of the year.

Regarding handling weak banks , Ms. Hong emphasized that this is very difficult and takes time, and right from the beginning of the Government's term, the Prime Minister has given very strong direction.

The State Bank, ministries and branches have submitted requests for policies from competent authorities and are currently active.

However, according to Ms. Hong, dealing with weak banks under normal conditions is difficult, but in the context of a half-term with extremely difficult world and domestic economies, it is even more difficult.

Therefore, the handling of weak banks is still in the final stage.

How to manage credit when there is a mass withdrawal at SCB?

Governor Nguyen Thi Hong also informed that the Economic Committee's review report on the five-year socio-economic development pointed out some limitations in monetary policy management. However, she hoped that it would be reviewed and considered.

Regarding the assessment that over-emphasizing inflation control according to many opinions is also the reason for high interest rates, especially at the end of 2022 and the beginning of 2023 in the context of business difficulties, adjusting slow credit growth is inappropriate, Ms. Hong said that these opinions are viewed from each individual perspective.

Regarding the management of monetary policy and banking activities of the State Bank, according to Ms. Hong, it must follow the spirit of closely following the requirements of the National Assembly and the overall situation of the economy.

Specifically, the resolution of the National Assembly and the Government requires reducing interest rates, ensuring stability in the foreign exchange market, and ensuring the safety of the banking system.

Therefore, in the context of the world increasing interest rates very high and considering that in 2022 we can still control inflation according to the National Assembly's target, the State Bank will still maintain the operating interest rate in the first months of the year.

However, in October 2022, the SCB Bank suffered a massive withdrawal, so the State Bank had to focus on ensuring system safety and preventing the risk of collapse like the collapse of banks around the world.

"Therefore, all measures at that time had to focus on preventing systemic collapse and at that time credit institutions were also stressed about liquidity, some lacked required reserves, and were at risk of insolvency.

At that time, the State Bank had not adjusted credit growth because banks were focusing on meeting people's payment capacity when there was a psychological impact, leading to people withdrawing money from small banks to large banks...", Ms. Hong explained.

She added that in October and November, when liquidity gradually improved, the State Bank immediately adjusted credit growth in early December.

"When the banking system has a mass withdrawal incident, the currency and foreign exchange markets are very tense, even the psychology of foreign investors. So in October 2022, the exchange rate increased very high, at times 10%.

At that time, to stabilize the exchange rate, there were only a few solutions: foreign currency intervention, interest rate adjustment, and liquidity restriction. At that time, the State Bank did all three and helped stabilize the exchange rate again... Therefore, I hope the National Assembly Standing Committee will consider it," Ms. Hong suggested.

Regarding the opinion that low interest rates and high inflation are a paradox that shows inadequacies in fiscal management and policies, Ms. Hong also hopes to consider this opinion because this opinion only looks at the inflation and interest rate perspective.

Regarding interest rate management, monetary policy tools must be based on tasks, including inflation targets, forecasts, world and domestic inflation trends, and requirements for exchange rate stability, ensuring system safety...

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