New Central Bank Governor Faces Dual Challenge of Growth and Financial System Stability

The new Governor of the State Bank faces the challenge of simultaneously fostering growth and ensuring financial system stability amid a volatile economy. Mr. Pham Duc An was approved by the National Assembly on April 8 to serve as Governor for the 2026-2031 term. In the hot seat of the banking sector amid rapidly rising interest rates and the highest credit growth in years (nearly 20%), the new Governor Pham Duc An must solve the dual task of supporting the economy to grow by lowering rates while maintaining system stability through effective management of liquidity, inflation, and foreign exchange reserves. Immediately upon taking office, at the handover ceremony on April 9, the new Governor acknowledged that the domestic and international economic environment is uncertain. "Rapid and unpredictable factors place very high demands on monetary policy management," he said. Dual challenge: growth and financial system safety According to Governor Pham Duc An, stabilizing interest rates, ensuring system safety, and improving credit quality are the central tasks in the coming period. From the end of 2025 to present, bank interest rates have been adjusted upward sharply, with deposit rates rising and big banks participating. Specifically, the 1- to 2-month rates have risen to near the ceiling of 4.75%. Notably, the 12-month tenor has surged to the highest level of 9–10% per year. The major challenge lies in implementing multiple objectives simultaneously. Experts say the new Governor and the banking sector must solve the dual task, both supporting fast growth in the near term and maintaining system stability. Mr. Nguyen Tu Anh, Director of Policy Research at Vin University, notes that the capital needs for growth will be large, driving up fundraising and resource allocation pressures. Meanwhile, the structure of the economy remains heavily bank-dependent. Although the capital market has developed, it is not deep enough to share the burden of supplying capital, especially compared with other Asian economies. This makes the role of monetary policy heavier. Managing in a context of high growth targets while maintaining macro stability becomes the central problem for the new Governor. Parliamentarian Tran Hoang Ngan stresses that growth in the coming period cannot continue to rely on capital but must shift toward real growth based on productivity, knowledge, and innovation. To achieve this, monetary policy cannot act alone. "There must be close coordination between monetary policy and fiscal policy," a former bank executive said, adding that this is the key to reducing the operational pressure on the Governor. One favorable point cited by experts is the personnel background of senior leaders. Several top positions today, such as the Prime Minister and the Vice Chairman of the National Assembly, originate from the banking sector, with practical experience in operations and deep understanding of financial activity. According to experts, this helps policy formulation be more practical and increases the likelihood of policy empathy with the banking sector in handling complex issues. The pressure to shift governance from experience to data Beyond growth, another significant challenge is changing the operating mindset. The banking sector is transitioning from an experience-based model to one driven by data and technology. "Digitization is not just an upgrade of equipment but a revolution in governance thinking," Mr. Tu Anh notes. In the context of rapidly developing artificial intelligence (AI) and digital technology, regulators not only have opportunities to improve operational efficiency but also face the risk of being overtaken if they fail to adapt. The essence of new technology is processing large volumes of data quickly and accurately. If regulators do not build a real-time monitoring system, their ability to regulate the market may erode. Therefore, the experts say the objective is to modernize data infrastructure rapidly, use big data to monitor the system's health, and enhance forecasting capabilities. Continuing to rely on old governance tools could increase systemic risk. From a policy tool perspective, a new path proposed by Vin University experts is to study the central bank's digital currency (CBDC). This is seen as a tool to make monetary policy more flexible by enabling programmable money for specific targets. Alongside long-term challenges, the banking sector also needs to address near-term issues such as the gold market, exchange rates, and bad debts. According to a former bank executive, with regard to the gold market, the approach to curb smuggling, speculation, and illicit transactions to restore order in the market is likely to be reinforced in the near term, rather than using foreign exchange to stabilize at all costs. In the foreign exchange market, that leader also believes exchange-rate pressures make maintaining low dong interest rates difficult. However, if investment channels like gold or real estate stabilize, capital could return to the banking system, thereby improving liquidity and reducing long-term interest-rate pressures. Additionally, non-performing loan risk tends to rise in an environment with high interest rates, necessitating regulators to prioritize monitoring and early resolution to avoid systemic risks. With a stable macroeconomic foundation, including room for public debt around 33% of GDP and controlled inflation, Tran Hoang Ngan says this provides a basis to trust in regulators' ability to respond.