P o lic y

e t a r y t a te
Mon n t ed b y S
l e m e
imp Vi e t n a m
n k o f
Ba
i L an Anh
Le T h
3:
Group n h H u ye n
ha
Trinh T
u c C u ong
nD
Ng u ye
T h i H uong
n
Nguye
Content
I. Definition
Monetary policy is the system
perspective, the policy of the State and
measures to influence and regulate
activities on monetary, credit, banking
and foreign exchange, creating the
stability of cash flow currency to
promote national economic
development.
II. Classification
1. Easy Monetary Policy: apply in
economic conditions deteriorated and
unemployment increased
2. Tight Monetary Policy: apply when the
economy is excessive growth, and
inflation is increasing
III. Objectives
1. Stable currency, prices and exchange
rates
2. Stability and economic growth
3. To create more jobs, stablize law and
order
 IV. Monetary policy
instruments
1. Reserve Requirements
2. Interest rate
3. Rediscount
4. Open market operations
5. Line of credit
6. Exchange rate adjustment
7. Inspection and control activities of the banking system in
the country
8. Intervention into Gold market and foreign currency market
1. Reserve Requirements
Reserve requirements are instruments used by
central bank to manage the availability of credit.
Therefore, reserve requirements will affect the
amount of credit that firm in economy can receive.

All Vietnamese commercial banks and credit

institutions are required to maintain a level of
“Compulsory minimum reserves" based on a
percentage of the capital mobilization.
1. Reserve Requirements
"The reserve requirement" exists in three
forms:

2. Cash on hand

3. Deposit required at the central bank

4. Bond reserves
1. Reserve Requirements
 Effects on economy:
 Required reserves increase -> capital loans of
commercial banks go down -> reduced
currency bloc.
 Required reserves decrease -> capital loans of
commercial banks go up -> rose currency
bloc.
1. Reserves
Requirements
Under Decision No 74/QĐ-NHNN 18/1/2010 and
Decision No 379/QĐ-NHNN 24/2/2009 ,
taking effect from 01/02/2010, Vietnamese
reserve requirements are:
Types
2. Interest Rate

Interest rate is the main tool to regulate

indirectly between demand and supply of
credit.

 

2. Interest Rate
Basic principles in using the interest rate tool


are:

1. Real interest rates cannot be higher than the

average profit rate of the economy.

2. The average lending interest rate must be

higher than the average deposit rate.

3. Long-term interest rates must be higher than

short-term interest rates.
2. Interest Rate
 For credit interest rate:
Fixed interest rates: Fixing the maximum interest
rates for deposits and the minimum interest rate
for loans.
Floating interest rate: Central bank indirectly
impacts interest rates on deposits and loans of
commercial banks using the discount rate to
regulate supply and demand for credit and
monetary amount of the economy.
2. Interest Rate
Monthly Information on Banking
Activities ( October , 2010 )
 Maintaining the base interest and refinancing rates
of 8% , re-discount rate of 6% , and the rate of 8% for
overnight inter-bank electronic payment and financing the
shortage in the clearing of the SBV for banks.
Performance :
 Implementing the consensus of interest rate reduction,
the common VND mobilizing rate slightly went down to 11%
from October 15, 2010, and the rate of 11% has been applied
to all deposits of 1-12 month terms. The USD mobilizing rate
slightly increased. The lending rates in both VND and USD
were comparatively stable as compared to the previous
month.
 3. Rediscount
Com m ercial banks
Money supply

SBV Financing Com m ercial banks

Com m ercial banks

 4. Open Market
Operations
Com m ercial bank
reserves
reserves
Sell Gvnt bonds

SBV Com m ercial bank

Buy gvnt bonds

Com m ercial bank

 5.Line of credit
Line of credit Commercial bank Credit
Credeit

SBV Line of credit Commercial bank

Line of credit
Commercial bank
 6. Exchange rate adjustment

Ø Necessity: the real exchange rate volatility in the market

with large amplitude which are detrimental to the
situation of production and life, damage to the field of
foreign trade, credit and international payment

Ø Method of adjusting the exchange rate:

Changes in interest rates
Foreign exchange intervention
Revaluation or devaluation of domestic currency
7. Inspection and control
activities of the banking system
in the country
 The inspection of the banking system to control the state
to direct the operation of that system under the legal
framework according to the instructions and guidance
of the state bank, become an indispensable measure to
achieve the objective of monetary policy

8. Intervention into Gold market
and foreign currency market
 When the price of gold and foreign currency fluctuations
in the market is large, the state bank to intervene
directly and promptly:
When prices rise too high foreign currency: The state
bank intervened by selling out, when the price falls too
low, the bank purchased
The intervention in the gold price as the import of
gold ...
 The end

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