Could you please tell us how necessary it is to set up a national financial supervision committee?

It is quite a normal requirement to set up a committee responsible for supervising securities, banking and insurance activities in a modern market economy and in the context of globalisation and financial liberalisation.

As you may know, a vast volume of capital is inflowing into Vietnam. Giant financial groups are also joining Vietnam’s market, bringing with them powerful investors who can have big impacts on Vietnam’s financial market.

There will be big money sums flowing into the securities market. The market will further develop and it needs to be controlled so as to avoid undesired serious fluctuations.

The activities in the monetary market also have links to the securities market; I mean, every hitch in the securities market direct impacts the monetary market, so we must pay appropriate attention to the markets.

How do you think the national financial supervision committee will work?

The committee that I have mentioned will not work as an inspection agency. This will be simply a macroscopic supervision committee, which will undertake remote monitoring. Its task is to monitor the market, make analyses to give advice and give warnings about possible bad happenings, thus helping the Prime Minister to manage the national economy.

First, monitoring the market in order to know how the capital inflows and outflows, the capital is short term or long term, how healthy the market is and what to do to prevent money laundering, and so on.

Second, monitoring the market in order to ensure smooth cooperation among the State Bank of Vietnam, the Ministry of Finance and other agencies to keep the normal operation and sustainable development of the market.

Sometime we say that the policies applied by one ministry may spoil the policies followed by another ministry. For example, the policies applied by the State Securities Commission, which aim to develop the stock market, spoil the plans followed by the central bank. Meanwhile, the central bank’s policies prove to be contrary to the ones suggested by the Ministry of Finance.

Now the market develops at a higher level, capital inflows and outflows from the market very quickly; therefore, it is necessary to attain effective and close links between ministries and branches. The job of the national financial supervision committee is to ensure effective inter-ministry operation. A committee at the national level would be able to give a more comprehensive view of the issues.

Do you mean that the agency will help the Government in forming management programmes?

Yes, I do. For example, the committee, by making analyses and carrying out research, would know about the bad debt situation of commercial banks. If it discovers abnormal signals, it will ring the alarm bell. In a finance liberalisation market, everything can happen, including unthinkable things.

Could you please talk more about the unthinkable things?

When the financial crisis happened in Thailand in 1997, it surprised everyone, because all the indexes of the country at that moment were okay. The Thai economy in that year had the economic growth rate of 7%, no state budget deficit, foreign debt ratio was below the safety line, no inflation. There was nothing that could be seen as “abnormal”.

There were only two very small problems. The trade deficit was at 12% of GDP (double the current level), and the Baht/US$ exchange rate was at baht25/US$1.

At that time, several US economics professors gave warnings about a financial crisis in the region, starting in Thailand, but regrettably, the warnings were ignored by Asian economists. Finally, the crisis happened in reality just a short time after the warnings.

When we accept globalisation, we should know that the investment capital flow will be very strong. I mean when we are in a globalised market, we will have to face what I call “the financial shocks” which will happen regularly.

If a financial crisis happens somewhere, it will spread very quickly, which we call the “domino effect”, especially in the context of globalised investments. This will require the governments of countries to pay appropriate attention and cooperate to prevent and settle problems if they occur.

For all these reasons, I think it is very necessary to set up a committee which can give reliable predictions.

What do you think the Government has to do to ensure the effective operation of the national financial supervision committee?

What the committee needs most are experienced, outstanding experts.

How far has the plan to set up the national financial supervision committee gone?

The Prime Minister has assigned the Ministry of Finance and other relevant ministries, including the State Bank of Vietnam to draw up the plan. In a recent meeting, the Prime Minister urged the acceleration of the plan’s compilation, saying that the plan must be completed in April.

Source: VTC