In recent days, people talk a lot about the high inflow of foreign capital into Vietnam. What will the State Bank of Vietnam do to control the capital?

As the national economy witnesses a high growth rate, the developing stock market has been attracting a big volume of foreign investment, especially indirect investment. The high cash flow into Vietnam has been influencing the supply and demand of foreign currencies, making the dollarization in the national economy more serious.

In this context, the central bank plans to undertake several measures as follows: First, reckoning the foreign portfolio investment in Vietnam in order to have accurate assessment on the impact of the investment on the foreign currency supply in Vietnam. Second, using open market operations and other tools to intervene in the foreign currency market: withdrawing money from circulation, avoiding sharp devaluation or revaluation of the local currency, raising foreign currency reserve, and stabilizing exchange rates. Third, perfecting the forex management mechanism which allows the control of currency transactions and capital transactions on the market.

The stock market and monetary market are the two communicating vessels. What will the central bank do to avoid shocks to the monetary market when it sets up a new policy?

There are always latent risks on the stock market which may threaten the stability of the financial system and the national economy. The State Bank of Vietnam and the Ministry of Finance are working together to appraise the stock market performance and development trend, anticipate possible risks, so that the central bank can draw up suitable policies to regulate the monetary market and control the credit into the stock market.

Regarding the control over the credit into the stock market, please tell us what the central bank would do if commercial banks cannot reduce their outstanding loans to securities investors to below 3% as required?

At the time, when the central bank released the document requesting banks to limit loaning on securities investment, we found 27 banks that had the outstanding loans higher than the allowed level. The number has reduced to 17 now. I well understand that banks are facing difficulties in collecting debts as banks tried to expand funding securities trading deals prior to July 2007.

Is it understandable that there would be no common punishment to be imposed on all violating banks so as to avoid shocks to the market?

The punishment will be decided based on the violation level. Our supreme principle is to avoid negative impacts on the monetary market.

The equalization of state owned banks has been catching the special attention from securities investors. What would you say about the idea to speed up the equalization to make the financial market more bustling and successfully absorb the profuse foreign capital?

The equalization will go ahead at the designed pace. Vietcombank will sell shares to strategic shareholders in October and to the public in November 2007. Other banks will issue shares in the last months of 2007 or early 2008. The Bank for Agriculture and Rural Development will be equitised later.

There is a growing tendency that groups and general corporations inject money in setting up banks. What would you say about this?

Current laws do not prohibit legal entities from establishing banks. However, I think that investors should think twice before making decisions on setting up banks. They should be informed that the competition among banks has become stiff as there are many banks operational in Vietnam.

The State Bank does not encourage groups or general corporations to establish banks or hold controlling stakes in the banks to be established. The Decision No 24 dated June 7, 2007 stipulates that one institutional investor must not hold more than 20% of total shares of a bank. Only the groups and general corporations that are really financially healthy would be accepted to become founding shareholders of banks.

Source: DTCK.