Hanoi (VNS/VNA) - The State Bank ofVietnam (SBV) has assigned a credit growth limit to each commercial bank in2019, with priority given to those who met Basel II’s capital safety and riskmanagement standards ahead of schedule.

According to the current regulation, the SBV setsa credit growth limit for the entire year for each bank – depending on itshealth – to ensure the credit growth target of the entire banking system duringthe year (14 percent for 2019).

This year, the highest credit growth limit of 15percent was assigned to the group of banks which met the Basel II’s standardsearlier than the SBV’s deadline of 2020. The remaining banks, meanwhile, wereallocated a lower rate of below 12 percent.

Last year, most banks were assigned higher creditgrowth limits, ranging from 14 percent to 16 percent.

The credit growth target of the entire bankingsystem and of each bank has tended to slow in the past two years. Expertsattributed the slowdown to the SBV’s policy changes. Previously, due to theunderdevelopment of the local stock market, banks, which should act only asintermediaries in the monetary market, had to function to fund medium- andlong-term capital for the economy.

However, the SBV has tried to gradually change therole of banks so as to make them fund only short-term capital for the economythrough the provision of working capital loans for businesses and households.

To make the change, the SBV required banks tolower the ratio of short-term funds for medium and long-term loans from 45percent in 2018 to 40 percent since early this year.

Experts have also agreed with the credit growthslowdown, saying it was necessary to improve banks’ credit quality and riskmanagement.

Nguyen Xuan Thanh from Fulbright UniversityVietnam said currently, the pressure on credit growth to support economicgrowth was not so high, so the allocation of a credit limit to each bankdepending on its health was reasonable. Accordingly, banks should only boostcredit in case of good control of risks, in order to ensure sustainable growth.

To offset the revenue reduction from lendingactivities, banks said they plan to increase profits through cutting operatingcosts and promoting digital services.

Do Minh Phu, chairman of TPBank, said digitalbanking would play a major role in reducing operating costs and increasing thecost-to-income ratio (CIR) efficiency, contributing to improving the bank’sprofits this year.

Phu said the biggest costs in banking operationswere the costs of network investment and development, along with the costs forpersonnel, which could be solved by the application of digital banking.Attracting customers to non-credit services and service fee collection was alsobecoming a trend.

Sharing the same view, Nghiem Xuan Thanh, chairmanof Vietcombank, said that 2019 would be the year of digital banking forVietcombank. In the past three years, the bank had focused on investment andimplementation of a new core banking system to boost service development andshift the revenue structure instead of relying heavily on credit.

Developing digital banking combined with retailbanking in a potential market of 95 million with a high percentage of youngpeople means commercial banks were quickly accumulating a customer base andlarge payment needs, Thành said.

The focus on digital banking combined with retailbanking has also helped some banks, like Vietcombank, Techcombank and HDBank,increase their number of individual customers rapidly in recent years, whichhas also contributed to raising the banks’ current account savings accounts(CASA) significantly. 

Reports showed some banks last year raised CASA to28-30 percent in the total structure of deposits. The large proportion oflow-interest rate deposits has helped banks reduce mobilisation and operatingcosts, increasing profits and improving marginal interest in lending.-VNS/VNA