The message was coincided with a year-end meeting held by the State Bank of Viet Nam yesterday in Ha Noi with representatives of commercial banks nationwide.

Dung also ordered the Sate Bank of Viet Nam to perform more effectively in issuing and implementing monetary policy, as well as take flexible measures to keep inflation below 7 per cent and achieve an economic growth rate of 6.5 per cent in 2010.

The central bank was also ordered to work with the National Assembly on the draft Law on Credit Institutions and Law on the State Bank of Viet Nam in order to forge a legal framework suited to the real economic situation, clarifying the powers of the central bank to effectively regulate banks as needed to ensure business performance.

Dung also reminded the central bank of its responsibilities for foreign exchange, ordering it to review measures to protect the economy from dollarisation.

During the year-end meeting, the State Bank of Viet Nam announced a credit growth target of 25 per cent in 2010, reining in credit from its rampant 37.7 per cent growth in 2009, a rate driven in large part by the Government's subsidised-interest loan programme begun last February.

Under the programme, part of the economic stimulus package, the Government subsidised interest payments to commercial banks at 4 per cent per year, allowing businesses and households to borrow money to maintain production, while, boosting bank liquidity.

The central bank vowed to continue to use interest rate and exchange rate policies to manage actively, flexibly but cautiously balance economic targets and the security of the banking industry.

It also promised to enhance supervision of foreign exchange and gold markets and continue to co-operate with other relevant ministries to promote non-cash payments and strengthen economic forecasting.

The central bank admitted weaknesses this year in its management of the foreign exchange market, and it took responsibility for excessively loosening monetary policy to increase credit growth, a move which negatively affected commercial bank capital ratios and threatened to reignite inflation.

Bank leaders at the meeting urged the central bank, as well as the Viet Nam Banking Association, to find ways to ensure the stability of the system.

"For interest rates, the central bank should draft regulations to curb extreme rates," said the general director of the Bank for Investment and Development of Viet Nam (BIDV). "It is unusual to have deposit and lending interest rates nearly the same."

Techcombank general director Nguyen Duc Vinh urged the central bank to apply policies in ways that avoid too much administrative intervention and support the creation of an effective and independent banking market.

By the end of October 2009, net equity of the nation's entire banking system grew by over 31 per cent, total assets grew by nearly 26.5 per cent, and profits from lending rose by over 53 per cent, it was reported at the meeting. However, bad debts accounted for 2.2 per cent of total outstanding loans, up 0.03 per cent from 2008.

Source: VietNamNet/Viet Nam News