HÀ NỘI — The latest instructions from Lê Minh Hưng, Governor of the State Bank of Việt Nam (SBV), require credit institutions and commercial banks in Việt Nam to strictly comply with the SBV’s regulations on mobilising capital in foreign currencies and not offer interest rates exceeding the ceiling levels.

The SBV’s intention is to ensure a balance between mobilised capital and lending capital, which is a way to minimise systematic risks in providing foreign currency credit.

Issued on Wednesday, an official document numbered 7295/NHNN-TTGSNH from the SBV demands credit institutions keep a close watch on foreign currency credit growth rates, while monitoring the ratio between credit and capital mobilisation in foreign currencies so that an equilibrium is maintained.

In particular, the SBV requested their local offices and other inspection authorities to monitor commercial banks’ other practices to ensure that official regulations on foreign currency interest rates are respected and implemented.

Document 7295 stated that any infringement of the SBV’s regulations would lead to a number of penalties, depending on the level of violation. These range from denial of granting permits for opening new banking branches, representative offices or ATMs, to prohibition of issuing new services.

Competition among credit institutions by offering foreign currency interest rates exceeding the regulated ceiling levels would also result in penalisation from the SBV.

The SBV also asked credit institutions to take the initiative in monitoring and exposing interest rate violations in foreign currency lending, mobilising and liquidating activities within their branch offices, and to implement the appropriate disciplinary actions.

On the other hand, the Governor requested that banks and other credit institutions conduct promotional programmes to encourage borrowing, while tending to customer services, especially businesses, to ensure productivity.

Previously, the SBV had issued Circular 06/2014/TT-NHNN and Decision 2589/QĐ-NHNN, requiring credit institutions to apply regulated interest rates, avoid using technical methods to bypass the SBV’s control, or participating in illicit competition by raising interest rates above the SBV’s designated maximum rates.

At the moment, the SBV’s regulated maximum deposit interest rate for US dollar is zero per cent for both individuals and organisations.

According to reports from the National Financial Supervisory Commission (NFSC), by the end of August 2017, total credit growth rate in the banking sector has reached 11.5 from the start of the year, as compared to 10.2 per cent in the same period of 2016.

Credit growth rate for lending in foreign currencies in the first eight months of 2017 is now 11.5 per cent, a staggering increase of 6.7 times from the same period last year at 1.7 per cent, while credit growth rate for loans in Vietnamese đồng is 11 per cent.

Nonetheless, foreign currency credit only accounts for 8.5 of total national outstanding debt. — VNS