Decree formalizes Vietnam central bank's role

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The government has issued a decree to formally spell out the State Bank of Vietnam's tasks as a central bank.

The 2010 SBV Law does confer the status of central bank on it, but does not elaborate on its functions.

The new decree, to take effect December 26, confirms that the SBV will oversee banking activities and foreign exchange, issue and regulate money, represent the government in public enterprises, regulate gold trade, combat money laundering, and set the annual inflation target.

The decree also describes the bank also as a "ministerial agency" of the government.

The SBV is the central institution in the fight against money laundering, and also manages deposit insurance as regulated by the law.

Economist Bui Kien Thanh said: "The new decree does not much change the tasks of the SBV. It just has more specific regulations on its role and rights."

Another economist, who declined to be named, said the SBV, under the new decree, remains a ministerial agency of the government, while in other countries, central banks operate independently of the government and report to the legislature.

"This independence is necessary for the central banks to implement policies which could bring positive impacts on the economy and stability in the long term," he pointed out.

If the central bank is an agency of the government, it has to take orders from it, and loosen or tighten policy at the whim of the government to serve its fiscal needs, he said.

He gave a recent example of commercial banks having ample deposits, but using the money to buy government bonds instead of increasing credit.

If the SBV had been an independent central bank, it could have placed a cap on purchase of government bonds like its counterparts often do, he said.

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