The State Bank of Vietnam (SBV) will announce a new prime interest rate for loans after a market rate has been set by credit organisations on deposits in order to prevent excessive lending rates, said SBV Governor Nguyen Van Giau.

Mr. Giau revealed this while talking to the media on the adjustment and amendments to the Law on the State Bank of Vietnam, which was approved at the current National Assembly’s session in Hanoi on June 16.

According to Mr. Giau, the Law has created an important legal foundation for changing the prime interest rate following the new market rate. This will help the central bank correctly carry out its monetary policy while enforcing the relevant laws on civil, criminal and labour affairs.

He said that in a market economy, a monetary policy is gradually formed by using indirect market tools to increase the supply of money which has an impact on short-term interest rates and national economic growth.

Normally, most central banks want to be clear over short-term interest rates. This is the reason why central banks often announce a number of their interest rates on monetary policy operations, the SBV Governor added.

He said that the nation’s monetary policy comprises decisions on finances at national level by authorised State agencies, including those to stabilise the currency, and control the inflation rate, as well as measures to achieve set targets. Accordingly, the National Assembly sets the annual inflation rate based on the consumer price index (CPI). The Prime Minister and the SBV Governor then decide which tools and measures to use to control national monetary policy.

Mr. Giau also emphasised that the SBV plays a key role in ensuring adequate capital resources to maintain the nation’s foreign currency reserves, the exchange rate policy and the ability to make international payments, as well as meeting the State’s demands for foreign currency.

Foreign currency reserves are a valuable asset to ensure the value of money in circulation. Therefore, he said, the national fund for foreign currency reserves is mainly used to intervene in the foreign currency market and stabilise the value of the domestic currency by buying and selling foreign currencies.

The SBV is in charge of managing the fund in line with the current regulations on the management of foreign currency. If using the reserves causes changes to the State budget estimates, it is essential to act according to the Law on the State budget.

NA deputies approved the Law on the State Bank of Vietnam (revised) on June 16 with an overwhelming vote.

The Law includes 7 chapters and 66 articles, in which the SBV’s legal status is still maintained as stipulated in the Law adopted in 1997, and is in line with the 1992 Constitution.

The 2010 Law states that the SBV is a ministry-level agency and is allowed to use monetary policy tools in a more flexible manner.

According to the Law, the SBV is responsible for reporting to the National Assembly, the Government and the public to ensure the transparency and publicity of its monetary policy operations.

Source:dtinews