New SBV circular announced
New SBV circular announced
Long-awaited amendments to Circular 36/2014/TT-NHNN regulating prudential ratios for the operations of credit institutions and foreign bank branches were officially issued on Friday afternoon, surprising many real estate insiders.
Accordingly, under a new circular issued by the State Bank of Viet Nam, the risk index of receivable lending for real estate and securities would be raised from 150 per cent (the lowest level) as stipulated in Circular No 36 to only 200 per cent.
This is lower than the cap of 250 per cent as proposed earlier by the SBV, which has made property investors worry about capital shortage.
The increase will come into effect on January 1, 2017.
The new Circular 06/2016/TT-NHNN also specifies a roadmap for the maximum ratio of short-term funds used for medium and long term loans to be reduced from 60 per cent to 40 per cent.
Under the newly issued decision, the 60 per cent ratio will be kept until December 31 this year. The ratio will be lowered to 50 per cent from January 1, 2017 to December 31, 2017. It will drop to 40 per cent from the beginning of 2018.
Nguyen Duc Do, deputy director of the Financial Economic Institute at the Ministry of Finance's Finance Academy, said that the SBV's choice to take such a "soft" measure was completely reasonable when taking into account the economy's less-than-expected pace of recovery.
If loans to the real estate sector were tightened too fast, it would have negative impacts on the property market in particular and economic growth in general, he said.
To some extent, facilitating the recovery of the real estate market was a measure to deal with the bad debts of commercial banks, Do added.
Currently, the amount of long-term deposits was less than the demand for long-term loans, thus a sudden and strong decrease in the ratio of short-term funds used for medium and long term loans would cause an increase in lending interest rates and a decrease in credit growth.
Do hailed the new policy as a step-by-step adjustment to avoid shocks for the economy.
"I hope that the policy, if accompanied with a stabilisation of dong which helps raise the trust in the currency, will increase the amount of long-term deposits, make commercial banks able to satisfy loan demands, and ease interest rate pressure."
