International ratings reflect Vietnam’s stable banking system

14:16 | 07/11/2018 Finance - Banking

(VEN) - The banking system has shown good results from the beginning of the year thanks to consistent policies of the State Bank of Vietnam (SBV) and efforts of commercial banks to ensure achievement of macroeconomic objectives.

international ratings reflect vietnams stable banking system

Deputy Prime Minister Vuong Dinh Hue chaired a meeting in late September to review the monetary policy in the third quarter of 2018 and to outline future tasks. At the meeting, he complimented the SBV for its proactive and flexible policy management, especially in terms of stabilizing exchange rates, interest rates and export credits. Given the escalating US-China trade war, while many countries tend to raise their interest rates, interest rates in Vietnam have been kept stable. In addition, the SBV has closely managed macroeconomic policies, including fiscal policy to stabilize and develop the monetary market and the government bond market, and reduce the cost of borrowing for the state budget.

According to the SBV’s Monetary Policy Department, state-owned and joint stock commercial banks have reduced their lending interest rates by 0.5 percent per year for customers with good ratings in priority areas. In addition, interest rates have remained stable.

Exchange rates have experienced certain pressures, but the SBV has adjusted the central rate in a flexible manner, regulated liquidity and interest rates of the Vietnamese dong, and enhanced public information and communication. As a result, market liquidity has been guaranteed, while transactions in foreign currencies have been smooth.

Credit has been expanded in priority areas, and has been closely controlled in risky areas such as real estate and securities. By the end of August 2018, credit for agricultural businesses, firms producing goods for exports, companies operating in support industries, and small- and medium-sized enterprises expanded by 12 percent, 7.43 percent, 13.83 percent, and nearly five percent compared to the end of 2017, respectively.

Lead Financial Sector Specialist at the World Bank in Vietnam Alwaleed Alatabani said low inflation and high economic growth demonstrate the SBV’s firm monetary policy management.

In mid-August, Moody’s Investors Service upgraded the ratings of some 14 Vietnamese commercial banks, and upgraded the Vietnamese government’s long-term issuer and senior unsecured ratings to Ba3 from B1. The upgrade to Ba3 is underpinned by strong growth potential, and supported by increasingly efficient use of labor and capital in the economy. The upgrade also reflects improvements in the health of the banking sector.

Fitch Ratings also upgraded the long-term issuer default ratings (IDRs) and revised the support rating floors of the Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), and the Vietnam Bank for Agriculture and Rural Development (Agribank) to BB- from B+. In addition, Fitch Ratings upgraded Vietnam’s sovereign rating based on the country’s rising foreign exchange reserves and strong economic growth. Accordingly, the rating of the nation’s long-term, foreign currency-denominated debt was raised one level to BB, with a stable outlook.

Duy Minh