Commercial banks are set to cope with challenges and opportunities in 2011 as monetary policies will be more flexible, Dr. Le Xuan Nghia, vice chairman of the National Financial Supervisory Committee, said in an interview with Dau Tu Tai Chinh Newspaper.
With the global economy will surely recover in 2011, foreign investments will return strongly to emerging markets in Asia, including Vietnam, said Dr. Le Xuan Nghia, vice chairman of the National Financial Supervisory Committee.
“Statistics show foreign investments keep flowing constantly into Vietnam in the last four months. Despite the inflation rising relatively high, investors are not too worried about the possibly of an unstable macro economy as the basic rate caused by monetary policies remains low,” Nghia said.
The inflation will decrease to 7-8 percent in this year if the gasoline price is around US$85-90 per barrel, helping commercial banks to cut interest rates, he said.
“Commercial lenders had to cope with the difference between the long-term and short-term interest rates last year, which hit the banking system hard. Therefore they should strengthen their operation as soon as possible this year,” he said.
The deposit interest rate fluctuation at the end of 2010 showed the interest rate was not driven by both the monetary market and the governmental regulations, threatening the safety of banks’ operation, Nghia noticed.
“Lenders this year will also have to cope with issues from the foreign exchange rate. They should offer foreign currency loans with the interest rates, which are adequate to each type of clients,” he said.
The vice chairman of the National Financial Supervisory Committee also warned the competition of foreign-owned and local banks this year will become harsher as the formers will be allowed to take the dong deposits from Vietnamese clients.
“But I do not think local lenders will be so worried about that. Foreign banks remain behind local lenders as their weaker financial strength and a fewer number of branches nationwide. Moreover, the strict risk managements prevent them from taking risks in such a small market in Vietnam,” he said.
“Besides, human resource is also a tough challenge for foreign lenders. Therefore, the biggest competitor of local banks in the next couple year is still themselves.”
Local lenders will also have to change their entire accounting software to match up with new regulations in the Law of Credit Institutions, which took effective on Jan. 1st 2011, he said.
“The new Law of Credit Institutions has some more regulations including forbidding banks to deposit to each others and restraining the credit growth of banks,” Dr. Nghia said.