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New rule limits banking risks
The State Bank of Viet Nam has issued a new regulation aimed at securing the stability of the nation's banking system.
Under Decision No 34/2008/QD-NHNN, issued on December 5, a credit institution is not allowed to invest more than 11 per cent of its registered capital to any single enterprise.
The decision also limits the total capital contribution of a single credit institution and its affiliates in a single enterprise, investment fund, project or other credit institution to no more than 11 per cent of the charter capital of that enterprise, investment fund, project or credit institution.
Total capital contribution by a credit institution in all related enterprises, investment funds, projects or credit institutions must not exceed 40 per cent of the credit institution's charter capital and reserves.
The new decision also requires credit institutions to institute policies aimed at maintaining non-performing loans at a ratio of less than 3 per cent of total outstanding loans. Financial institutions are also forbidden to extend credit without collateral, or to provide loans at preferential terms to an enterprise in which the institution has a controlling interest.
Total loans made to and capital underwritten by a credit institution for an enterprise in which the credit institution has a controlling interest must not exceed 20 per cent of the credit institution's equity.
Loans without collateral to an in-house financial leasing company are further restricted and must not exceed 5 per cent of the institution's equity.
Viet Nam News, vietnamnet
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