The State Bank of Vietnam plays a critical role in the country’s financial system and overall economic stability. Understanding its functions and contributions is essential for grasping the broader dynamics of Vietnam’s economic landscape. This article delves into the definition, characteristics, roles, and contributions of the State Bank of Vietnam.
- Definition and Characteristics of the State Bank of Vietnam
Based on the regulations established by the Government Organization Law enacted on June 19, 2015, along with amendments and supplements to the Government Organization Law and the Local Government Organization Law on November 22, 2019, as well as the State Bank of Vietnam Law of June 16, 2010, the government issued Decree No. 102/2022/ND-CP on December 12, 2022. This decree specifically outlines the functions, tasks, powers, and organizational structure of the State Bank of Vietnam. These regulations aim to ensure the effective operation of the State Bank while facilitating the implementation of monetary policies, managing the banking system, and ensuring national financial stability.
The State Bank of Vietnam serves as the central bank of the Socialist Republic of Vietnam. It performs state management functions related to monetary policies, banking operations, and foreign exchange, which include managing and regulating monetary and banking issues. Additionally, the State Bank issues currency, provides banking services to credit institutions, and offers monetary services to the government. Particularly, this agency also undertakes the responsibility of state management over public services within its authority.
- Role of the State Bank of Vietnam
According to Article 2 of the State Bank of Vietnam Law of 2010, the State Bank operates as a ministerial-level agency under the Government, functioning as the central bank of Vietnam. It operates as a legal entity with state-owned capital and is headquartered in Hanoi. This agency manages state functions related to monetary policies, banking operations, and foreign exchange.
As stated in Article 4 of the same law, the State Bank of Vietnam is entrusted with numerous important tasks and powers to ensure the stability and development of the economy. Specifically, the State Bank is responsible for maintaining the value of the currency, ensuring the safety of banking operations and the system of credit institutions, and enhancing the efficiency of the national payment system. The State Bank participates in formulating socio-economic development strategies and banking sector policies, as well as issuing and monitoring legal documents related to monetary and banking regulations. It also sets annual inflation targets, organizes and develops the monetary market, and carries out operations related to the issuance and management of banknotes and coins. Furthermore, the State Bank grants and revokes licenses for credit institutions, manages deposit insurance, and collaborates on policies for anti-money laundering. It also oversees foreign exchange management, foreign reserves, and tasks related to foreign borrowing. The State Bank represents the state in international monetary and banking organizations, provides credit information services, and engages in international cooperation in monetary and banking matters.
- Contributions of the State Bank of Vietnam
On January 8, 2024, Prime Minister Pham Minh Chinh attended and delivered directives at the conference to implement the banking sector’s tasks for 2024 in Hanoi. The conference also featured Deputy Prime Minister Le Minh Khai and the Governor of the State Bank of Vietnam, Nguyen Thi Hong, along with various ministers and leaders from central agencies.
In his remarks, Prime Minister Chinh emphasized the critical role of the banking sector as the “lifeblood” of the national economy. He noted that banking operations are not only scientific in nature but also have a profound impact on public sentiment and social issues. Therefore, he called for a deeper understanding of the banking system and appropriate actions in leadership, governance, and the formulation of policies to develop the banking sector. The goal is to ensure that the banking system operates healthily, safely, and sustainably, thereby contributing to the nation’s development.
Notably, Prime Minister Chinh highlighted that in 2023, the total deposits in the banking system from residents and economic organizations reached over 13.5 quadrillion VND, marking the highest level in the history of the banking sector. This reflects not only the improved living standards of the population but also their trust in the Party, the State, and the banking system. Such trust is a vital resource for promoting sustainable national development.
Reflecting on the challenges faced by the banking sector in 2023, Prime Minister Chinh acknowledged the commendable achievements attained despite the difficulties. He emphasized the necessity of analyzing the reasons behind these successes and deriving lessons from the banking sector’s operational practices.
In 2023, Vietnam’s socio-economic landscape continued to show positive recovery, with continuous improvements month by month and quarter by quarter, achieving the set general targets. The Prime Minister commended and recognized the efforts and determination of the banking sector, acknowledging their significant contributions to the nation’s overall success amidst challenging circumstances.
Highlighting the key outcomes of banking operations in 2023, the Prime Minister noted that the State Bank of Vietnam made significant contributions to macroeconomic stability, inflation control, and maintaining large balances and stability in the foreign exchange market and exchange rates. In light of the complex and unpredictable global situation, especially with rising inflation pressures and increased values of major currencies, the State Bank actively, flexibly, and timely managed monetary policy. The State Bank coordinated harmoniously with fiscal policies and other macroeconomic policies, shifting its approach from “tightening” to “flexible easing.” Maintaining the stability of the Vietnamese dong against other regional currencies contributed to enhancing the assessment of Vietnam’s economy by several reputable international organizations.
Additionally, the State Bank proactively supported businesses and individuals in overcoming difficulties, restoring production, and promoting economic growth through various specific solutions and policies. Notably, the State Bank made four consecutive adjustments to reduce operational interest rates and actively managed credit growth in the fourth quarter of 2023. By December 31, 2023, total credit in the economy had increased by approximately 13.71% compared to the end of 2022, marking a positive outcome in a challenging context.
The State Bank of Vietnam has effectively fulfilled its role in maintaining the stability and safety of the credit institution system while continuing to restructure this sector decisively. The State Bank has actively reviewed and improved the monetary and banking regulatory framework, promptly identifying and addressing obstacles and inconsistencies in policies aimed at supporting the development of key markets. The agency focused on finalizing and presenting the revised Credit Institutions Law draft to the National Assembly while timely issuing Circulars No. 03, 06, and 10 to support the development of the corporate bond and real estate markets. The State Bank also managed and supervised to ensure that the systems of credit institutions, the monetary market, and the foreign exchange market remained stable and under control.
In addition to its achievements, the State Bank has been a pioneer in digital transformation and administrative reform, particularly in promoting cashless payments, which optimizes costs for the economy and enhances the business environment. Over the past seven years, the State Bank has been at the forefront among ministries and sectors in terms of administrative reform indicators (Par Index).
However, despite these accomplishments, the management of monetary policy and banking operations still faces certain limitations and challenges. Prime Minister Pham Minh Chinh commended the frank acknowledgment of the banking sector’s shortcomings in recent times. He emphasized that the banking sector needs to strive further to closely monitor the situation and respond with timely and appropriate policies. Although banking activities inherently involve risks, effective risk control tools are necessary. Furthermore, the State Bank needs to enhance coordination with ministries and sectors to create a combined strength, better understand, and share more with businesses and individuals in difficult times, and prioritize inspection and supervision to improve management effectiveness.
In conclusion, the State Bank of Vietnam serves as a cornerstone of the national economy, playing a vital role in maintaining financial stability, implementing monetary policy, and supporting sustainable economic growth. Its contributions are critical for fostering trust within the financial system and ensuring the smooth functioning of monetary operations. As Vietnam continues to navigate evolving economic landscapes, the proactive and adaptive strategies of the State Bank will be essential for achieving long-term economic objectives and enhancing the overall prosperity of the nation.
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