HÀ NỘI — The State Bank of Vietnam (SBV) will step up efforts to prevent property prices from being pushed to unrealistic levels, require lower lending rates for priority economic sectors and strengthen supervision of banks' compliance with interest rate regulations, according to Governor Phạm Đức An.

Speaking at a conference on October 23, An stressed the need to control real estate credit risks, ensure the safety of credit institutions and reinforce discipline in the money market.

He noted that the property market had experienced rapid growth in recent years, with the banking sector providing a substantial amount of credit to the sector. 

However, in line with the Party and State leadership's requirements to tighten market controls and prevent speculation and profiteering in housing and real estate, both businesses and credit institutions needed to adopt development strategies suited to current conditions.

Drawing lessons from the consequences of overheated property markets in several major economies, the governor said commercial banks and real estate businesses should no longer regard property as a sector that would always generate high profits. 

Instead, they needed to balance their interests and pursue more sustainable development.

"Property prices must not be pushed to excessively high levels, creating an artificial market. Commercial banks and real estate businesses must rebalance their interests to avoid a hard landing, ensuring that the market can be maintained and develop in a stable manner while complying with the new policies and requirements of the Party and State leadership," An said.

He added that the SBV would intervene to prevent property prices from being artificially inflated while avoiding a hard landing that could undermine the market's stability and development.

Alongside tighter controls on real estate risks, the governor called on credit institutions to ensure operational safety, closely manage lending risks and direct capital towards production, business activities and sectors that drive economic growth.

Lower lending rates 

Responding to businesses' concerns over high borrowing costs, An acknowledged that some credit institutions could not immediately reduce lending rates because they had previously mobilised funds at high costs.

However, he stressed that lending rates should decline for sectors prioritised by the central bank, including production, trade, services and infrastructure projects that support growth.

"In the coming period, lending rates for sectors directed by the SBV, such as production, trade, services and infrastructure projects that support growth and serve as drivers of economic expansion, must be reduced," he said.

The governor singled out the Southeast region as a priority for credit policies, noting that it accounted for a substantial share of the economy and had a direct impact on overall economic growth.

To ensure adequate funding for the economy, credit institutions must continue to mobilise capital without engaging in unhealthy interest rate competition or aggressively poaching one another's customers, he said.

Rising credit demand in recent months had put pressure on banks' funding sources and prompted competition over deposit rates. In response, the SBV had flexibly deployed monetary policy instruments, including open market operations, refinancing and foreign exchange swaps, to support system liquidity.

'Secret customers' 

The SBV has instructed its departments, divisions and branches to strengthen inspections and supervision of compliance with interest rate directives. These efforts could include using 'secret customers' to identify violations, An said.

Credit institutions that fail to comply with the central bank's interest rate directives would face penalties or restrictions on credit growth, he warned.

"Market discipline is directly linked to national monetary security. We cannot allow a few banks with high growth ambitions to disrupt the market and engage in unhealthy competition," he said.

The governor cautioned against banks raising deposit rates simply to attract funds away from other credit institutions, a practice that could drive up funding costs across the banking system and put further pressure on lending rates.

At the same time, he emphasised that interest rates were a sensitive issue requiring a balance between the interests of depositors, banks and borrowers.

Excessively high lending rates could undermine business efficiency and companies' ability to repay loans, while deposit rates that were insufficiently attractive could constrain banks' ability to mobilise funds.

The SBV would therefore continue to closely monitor interest rates, exchange rates, inflation and international developments to maintain flexible monetary policy management. 

The central bank would also coordinate monetary policy with fiscal policy to help stabilise the macroeconomy, safeguard the banking system and support economic growth, An said. — BIZHUB/VNS