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Securities companies find lending loop-hole
After the State Bank set the cap on securities lending, securities companies took up the slack.
Commercial banks dare not extend loans to securities investors exceeding the central bank’s stipulated 3% of total outstanding loans. However, securities companies are now working with commercial banks to offer securities loans.
As commercial banks cannot increase securities credit, they would be happy to provide capital to securities companies so they can do the job themselves. Securities companies understand that securities lending is a profitable business and have decided not to miss the opportunity.
Vietnamese securities companies are not allowed to lend money. Therefore, they have to provide loans under in the form of repurchase agreements.
Doan Duc Vinh, General Director of Au Viet Securities Company (AVSC), said that his company will seek more capital sources to provide more loans to securities investors. To date, AVSC has acquired VND400bil ($25mil) by shaking hands with Agribank’s HCM City branch. It has wrapped up negotiations with the Saigon Commercial Joint Stock Bank and Agribank on providing capital, and it is expected that VND20bil ($1.25mil) will be disbursed in the first quarter of the year.
Licensed in November 2007 and a late comer to the market, An Phat Securities Company has successfully reached a cooperation agreement with Agribank’s Hong Ha and Phu Nhuan branches, under which they will provide VND400bil ($25mil) for securities lending.
Tran Thien Ha, General Director of An Phat, said there is no limitation on the mortgaged securities items. An Phat accepts all kinds of securities, both OTC or listed items. The company has lent VND100bil ($6.25mil) so far.
Mr. Ha says he will negotiate with State-owned banks to get more capital.
Dong Duong (DDS) and Gia Quyen (EPS) securities companies, the newest, have also quickly found capital sources from two big State-owned institutions, Agribank and Vietcombank.
EPS has announced it will provide the maximum loan amount, 45% of the market value of the mortgaged securities for 6-12 months. Meanwhile, DDS can lend 50% of mortgaged securities’ value with an interest rate of 1.1% per month.
Analysts say in other countries, it is securities companies, not commercial banks, that provide loans to securities investors. Securities companies prove to be more professional than banks in assessing the risks of loans because they know the liquidity level of mortgaged shares and can more accurately assess the movements and trends of the stock market. Therefore, analysts say the trend of securities companies lending investors money is both more standardize and will soon prevail.
VNN
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