STATEBANKOFVIETNAM

Primary Objective and Responsibility The organization and operation of the State Bank of Vietnam (hereinafter referred to as the SBV) are regulated in the Law on the State Bank of Vietnam, 2010. Status and Functions of the SBV are as follows: 1. The SBV shall be a ministerial-level agency of the Government, the Central Bank of the Socialist Republic of Vietnam. 2. The SBV shall be a legal entity, having the legal capital under the State ownership, have head-office in Hanoi. 3. The SBV shall perform the State management function over monetary, banking activities and foreign exchange, performs the function of the central bank as the bank of issuing money, the bank of the credit institutions and provides monetary services for the Government. Policy-Making Body The national monetary policies are monetary decisions at national level of the State competent authorities, including decisions on objective of the currency value stability identified by inflation target, decisions on using instruments and measures in order to perform the set-up objectives. The Government submits annual inflation target to the National Assembly for decision through deciding the consumer price index and supervise implementation of the national monetary policy. The President, on behalf of the Socialist Republic of Vietnam, performs duties and powers regulated by the Constitution and the law in negotiating, signing, joining international treaties in the monetary and banking field. The SBV publishes the Annual Report, which reviews the activities of the Bank in the reporting year and outlines the plan for the next year. The Report also covers information of monetary policy management. Changes in monetary policy stance are also conveyed to the public via press releases, which are posted on the Banks website at http://www.sbv.gov.vn

Release of Policy Information

MONETARY POLICY IMPLEMENTATION

In implementation of the resolutions and directions from the National Assembly and the Prime Minister, the State Bank of Vietnam (SBV) conducted tight and prudent monetary policy to curb inflation and stabilize macro-economy as well as to ensure social security and welfares in 2011, as the followings: 1. Managing monetary policy instruments in an active and prudent manner to support liquidity for payment activities of credit institutions as well as to stabilize markets by: (1) Flexibly managing the monetary policy tools to control the money supply; (2) Increasing reserve requirement ratio for foreign currency deposits of credit institutions from 4-6-7-8% for maturities below 12 months and 2-4-5-6% for maturities from 12 months above as well as to expand foreign currency objects; (3) Flexibly operating the open-market operations at appropriate volume and interest rates. Interest rates gradually increased from 10-10.5-11-12-13-14 to 15% per annual but then reduced to 14% per annual to support liquidity and stabilize

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money markets; (4) Continuing refinancing lending to support credit to rural and agricultural areas; providing overnight lending to ensure liquidity of the inter-bank payment system. 2. Managing policy interest rates of SBV in accordance with market developments and improve legal framework on interest rate management pursuant to Laws on the SBV and Laws on Credit Institutions 2010: (1) Increasing refinancing interest rate from 9-11-12-13-14-15% per annual, overnight lending rate from 9-11-12-13-1416% per annual, re-discount rate from 7-12-13% per annual; (2) The maximum deposit interest rates applied for organizations and individuals at credit institutions and foreign bank branches were as follows: (i) in VND: 6% per annual for maturities of less than 1 months and 14% per annual for maturities of 1 months and above; (ii) in USD: the maximum deposit rates for individual and organization were 2% and 0.5% per annual, respectively; monitoring the implementation of VND and USD interest caps of credit institutions; customer withdrawing deposits before due date would be applied the minimum interest rate. 3. Closely controlling credit growth below 20% and total liquidity from 15% - 16%. Credit structure was adjusted to focus on rural and agricultural production; lending to non-production and discouraged areas was restricted,, as followings: (1) Requesting and closely monitoring credit institutions and foreign bank branches to control credit growth below 20%, adjusting credit structure by increasing investment for business - production, agriculture and rural development, export, supporting industries, small and medium enterprises; reducing outstanding growth rate to non-production sector to 22% by June 31, 2011 and to 16% by December 31, 2011; (2) Narrowing foreign currency lending for borrowers as residents; promulgating the Circular on buying corporate bonds of credit institutions. 4. Managing foreign exchange markets and exchange rates consistent with the supply and demand for foreign currencies; increasing market liquidity and encouraging export to reduce trade deficit; improving international balance of payments; increasing the State foreign reserves, as followings: (1) Increasing the average inter-bank by 9.3% and narrowing trading band from + -3% to + -1% from February 11, 2011; purchasing foreign currencies to increase foreign reserves when the foreign exchange market experienced favorable developments, interfering at reasonable volume into the inter-bank market through a number of large commercial banks, selling foreign currencies to support the essential needs of the economy such as import of petrol, oil, and electricity; (2) Expanding the object of state enterprises eligible for selling foreign currencies to credit institutions, (3) Providing the interest rate cap and reducing the maximum interest cap for USD mobilization of economic entities and individuals at credit institutions to limit foreign currency speculation; (4) Coordinating with relevant ministries, agencies and requesting SBVs subsidiary banks in provinces and cities as well as credit institutions to implement measures to stabilize foreign exchange market, exchange rates and gold market.

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5. Implementing strong measures to stabilize domestic gold price and gold market: Issuing Circular No. 11/2011/TT-NHNN dated April 29, 2011, which regulates the termination of gold mobilization and lending of credit institutions. Besides, supervising and monitoring credit institutions in their implementation of the Circulars provisions to ensure the termination by May 1, 2012. 6. Effectively conducting information dissemination and communication about monetary policy management and banking activities; organizing policy dialogues between the Central Bank and commercial banks having large market shares to timely grasp the money market developments, banking activities, difficulties of the credit institutions in implementing the policies of the Central Bank, as well as to propose solutions for money market stabilization and banking operational safety. Policy Instruments In implementation of national monetary policy, the SBV applies such instruments as refinancing, interest rates, exchange rates, reserve requirement, open-market operations and credit limit.

FINANCIAL STABILITY Authorities Responsible for Financial Stability The authorities responsible for financial stability and supervision of the financial sector in Vietnam are the SBV and the Ministry of Finance. The SBV is responsible for financial supervision of credit institutions while the Ministry of Finance supervises the insurance and securities companies. Strategy for Supervision and Monitoring of Financial Stability The SBV is currently in the transitional phase from complementary to risk-based supervision. The former approach has shortcomings and is not very appropriate because the operations of credit institutions have become more diversified and risky. With international support, the SBV has completed its Off-site Supervision Renovation Project which will be implemented after due approval from the Governor. Accordingly, the risk-based approach under CAMELS will be applied and cover the key issues, namely (i) micro-supervision on individual credit institutions; (ii) macro-supervision on the whole system; and, (iii) early warning system.

Plan and To the large part, the banking system of Vietnam has applied capital adequacy ratios Progress for the (CARs) of Basel I and gradually moving toward Basel II. Regulations on CARs of Implementation of State Bank of Vietnam have been more consistent with those of Basel I version Basel II 1988. However, current regulations on CARs of SBV have not taken market risks into account as those of Basel I version 1996. To ensure banking system development orientation toward moving close to international practice and standards, Vietnam has submitted to the Governor the proposal on the roadmap to implement Basel II from 2012 on for SBV and commercial banks, as well as to approach toward full application of Basel II after 2020..

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CURRENT MONETARY OFFICIALS

(As of 18 January 2012)

Governor Deputy Governors

Mr. Nguyen Van Binh Mr. Tran Minh Tuan Mr. Dang Thanh Binh Mr. Nguyen Dong Tien Mr. Nguyen Toan Thang Mr. Le Minh Hung

Address: Tel: Email: Website:

State Bank of Vietnam, 49 Ly Thai To Street, Hoan Kiem District, Hanoi, Vietnam 84-4-3934 3360; Facsimile : 84-4-3825 0612; ieod@sbv.gov.vn or dabiensbv@gmail.com http://www.sbv.gov.vn

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