Governor Nguyen Thi Hong said that the operating interest rate would be reduced if conditions permit, but hoped that businesses would understand because it has to trade off many macro goals.

At the conference to remove difficulties for businesses in the Southeast region in Ho Chi Minh City on May 11, the Governor of the State Bank received many shares from businesses and local leaders about the still high interest rate.

Ms. Ly Kim Chi, Chairman of the Food and Food Association of Ho Chi Minh City, said that there are many solutions to support businesses in recent times, but businesses have only just made it easier to breathe, not yet dare to say recovery or development.

The interest rate for corporate loans is still at 10%, especially for the food industry, which has lower incentives, about 7-8%. With the current high interest rate, according to her, it is difficult for businesses to reproduce to recover. “Pulling down lending rates is a huge problem, affecting the recovery process of businesses,” she said.

In the context that businesses are struggling, Ms. Ly Kim Chi wants the State Bank to direct credit institutions to further reduce lending interest rates. “We keep hearing news that banks are reporting big profits while businesses are having a hard time,” she said.

This businessman expects banks to reduce costs to share less burden with customers. Besides, Ms. Kim Chi also expects the State Bank to further reduce the operating interest rate this month, in the context that inflation and exchange rate have cooled down.

Representing many opinions of businesses in the area, Chairman of the People’s Committee of Ho Chi Minh City, Mr. Phan Van Mai, also proposed a further reduction in lending interest rates. According to him, most businesses reflect that interest rates have decreased, but the average is still high at 10%. Meanwhile, the desire of businesses is to bring the interest rate to 7-8%. This is an administrative challenge, but according to him, the parties need to sit down to discuss a solution.

At the conference, State Bank Governor Nguyen Thi Hong acknowledged that the interest rates were not as expected of borrowers, but she expected businesses to better understand the banking industry.

“We really want to lower interest rates, but how much will depend on the macro balance,” the governor said. There is an opinion that inflation has decreased so we can expand monetary policy. But operating monetary policy must look ahead. Vietnam’s inflation target is 4.5% while core inflation is currently near 5%.

Operating monetary and credit policy is not just a matter of interest rates. “We have to reduce interest rates, expand credit, stabilize exchange rates, and at the same time ensure the safety of the banking system. Every goal is important,” the Governor said.

“In 2022, although the US and other countries increased rapidly and raised interest rates strongly, we still tried not to raise the operating interest rate. But in September when the exchange rate increased very high, then the State Bank was forced to implement a series of measures. policies, including raising interest rates,” Ms. Hong said. Vietnam can issue dong, but cannot issue foreign currency. Because if the dong depreciates, foreign investors withdraw capital, the foreign exchange market is not stable, how can the macroeconomy be stabilized?

Last October, there was an incident where people withdrew money at SCB, the priority at that time, she said, was to ensure system safety, banks had to defend to ensure liquidity in the event of a bad situation.

Entering 2023, when the situation is stable, the liquidity of the system is improved, and the exchange rate cools down, Vietnam will be able to reduce the operating interest rate even though the US Federal Reserve (Fed) still raises interest rates.

“We continue to monitor. In the context of the Fed’s rate hike slowing down, liquidity improving, we will further reduce the operating interest rate, if conditions allow,” Ms. Hong said. However, the Governor emphasized that reducing interest rates is not the only goal for monetary policy management, but there are many other goals that must be balanced.

For commercial banks, the Government and the State Bank have also directed banks to further reduce interest rates. “Banks with good financial position can reduce interest rates, but bad financial banks will have a harder time adjusting,” she said.

The Bank mainly mobilizes short-term while long-term loans have not been recovered in the context of the declining ability of customers to repay. This is also one of the reasons according to the Governor, causing some banks to anchor long-term lending interest rates at high levels, to offset risks.

At the conference, another issue that was mentioned a lot was the failure of the 2% interest rate support package. Many businesses and local leaders proposed to urgently review this support package to have a solution to modify or transfer money to another support package, because the actual implementation efficiency is very low.

In addition, many businesses believe that commercial banks should be more open in setting disbursement criteria. They also recommend banks not to reduce the value of real estate collateral in difficult business conditions.

However, the Governor emphasized the point of view of risk management, ensuring the safety of the banking system, especially after the lessons of the recent failures of two US banks. These two banks both have assets of over 200 billion USD and have been profitable for at least 53 consecutive quarters but still fail because of investing in long-term assets.

Drawing lessons from two healthy but failing banks because of their failure to manage the risks of long-term assets, the Governor also added that the possibility of “mass withdrawal” with banks is more likely than in the previous period. before people just sit at home and transact electronically. Therefore, banks themselves must also be cautious when lending, ensuring the availability of the necessary amount of money to meet people’s needs. If risk management is not good, the bank’s failure will have a ripple effect on the economy, Ms. Hong shared.