In Vietnam, ensuring a stable banking sector is the core aim of its monetary and financial policy and remains the most important factor in priming the greater macro economy for sustained growth. In a socialist-oriented market economy like Vietnam, it’s the country’s State Bank that plays the main role in making the institutional enhancements necessary to establish a level, stable playing field that encourages fair competition and enforcement of regulations and the rule of law. These are all critical to improving the functioning of the economy and letting the world know Vietnam is truly ready and open for business.
The country’s top leadership has set the target of modernizing the State Bank of Vietnam: that means streamlining the entire banking system to focus on a more appropriate organizational model and operational mechanisms to promote transparency and accountability while maintaining the features of a socialist-oriented market economy.
The leadership’s top priority remains to maintain stability in the macro economy by controlling the rate of inflation and guaranteeing the safety of the credit institutions’ financial networks. The State Bank will now play the role of supervisor for the the country’s payment processing system?, essentially becoming a payment and settlement processing center for all payment systems and the financial - monetary transactions within the economy.
The government’s new orientation is aimed at having the State Bank of Vietnam manage monetary policy, inflation, and support for macro-economy stability and sustainable growth. The central government’s recent decision can briefly be divided into two phases:
2018 - 2020: Basel II Compliance to Fortify Local Banks
2021 - 2030: Towards Green Growth and a Cashless
Reduced Cash Payments: The central government has issued targets to reduce the proportion of cash payments circulating in the economy to less than 10 percent by 2020 and 8 percent by 2025, while promoting the expansion of automatic teller machine (ATM) networks and point-of-sale (POS) transactions nationwide.
Green Credit: In accordance with Vietnam’s commitments to the prevention and migration of global climate change, the central government has issued policies and targets aimed at enhancing the allocation of capital towards so-called green credit. In an effort aimed at promoting the concept of green banks they have begun setting requirements on the proportion of required credit investments to be allocated toward projects in renewable energy, clean energy, sustainable development and climate change and mitigation. Such targeted state-directed investment policies will no doubt help spur the development of Vietnam’s nascent green economy, and favor business investment related to so-called green growth.
Analysis: Taken together, the Vietnam’s government’s recent policy changes and 10-year plan continue a pattern of incremental improvement and growth in the country’s banking and finance sector in the face of fierce global competition and continued integration in global trade networks and international compliance regimes.
Written by: VietnamCredit