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State Bank amends Decision 03; but new barriers emerge
The State Bank of Vietnam has finally announced it will amend Decision 03 on controlling securities lending after facing strong opposition from investors. However, the long-awaited amendment is not as satisfying as many hoped.
Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien announced yesterday that the bank is considering a revision of the controversial regulation limiting commercial bank loans against securities collateral.
Once the regulation being drafted comes into effect, the maximum commercial banks will be able to lend securities investors would be equal to 20% of commercial banks’ chartered capital. Meanwhile, the Decision 03 said that the maximum outstanding loans commercial banks can lend securities investors must not be higher than 3% of total outstanding loans.
The central bank might think that it would be easier to control securities lending based on the figures about banks’ chartered capital, because chartered capital does not change regularly. Meanwhile, it will be more difficult and risky to control securities loaning based on the changeable figure – total outstanding loans.
However, the central bank’s new method to control the lending to securities investors is still disappointing to many. Analysts have warned that the new method will further tighten securities lending and that the total value of loans to securities investments will actually decrease.
The problem lies in the fact that with the new method, big banks with high chartered capital will have the right to lend more than the smaller banks with lower chartered capital. This spells that banks wanting to lend for securities investments and have experience in this, will not be able to lend big loans, while the big banks, including State-owned institutions – far less experienced – will be the primary lending entities.
The table below shows that most banks with actually securities experience will actually be able to offer less securities lending under the amendment.
Techcombank and ACB, which have advantages in funding securities investments, will have to cut the loans to securities investors by nearly a half compared to previously, when Decision 03 was valid. Techcombank will have to reduce lending to VND350bil from VND605bil. Meanwhile ACB’s new limit will be VND536bil instead of VND948bil.
There are over 10 banks in Vietnam which have the chartered capital of more than VND2tril, and some have more than VND3tril, which means that the biggest banks can lend VND400-600bil at maximum. Sacombank, which is now having the biggest chartered capital in Vietnam, VND4,449bil, will have to cut VND140bil in lending limit.
Meanwhile, state owned banks, which do not have much experience in lending securities investors, will have higher securities loan limits, because they have high chartered capital.
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