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Economists want middle road for securities loans
The draft law on credit institutions being compiled prohibits commercial banks from loaning to fund securities investments. However, the plan has not been applauded by economists, who believe that it is necessary to find a way to ensure the safety of credit institutions and support the stock market.
Under the current regulations, commercial banks are allowed to give loans to fund securities investments, provided that outstanding loans are not higher than 20% of their chartered capital.
The limit of 20% is considered a way to restrain commercial banks from becoming absorbed in funding securities investments. However, the limit seems to not reassure management agencies. The compilers of the draft law on credit institutions want to cut the cash flow from banks to the stock market by prohibiting banks from loaning to securities investors altogether.
Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien said that the outstanding loans funding securities investments remain modest, just ten trillion dong. However, Tien still believes that it is necessary to set up strict regulations to help banks minimise risks.
Many banking experts have applauded the central bank’s plan to tighten loans for securities investments, saying that the stock market is highly risky, and that the stock market’s performance depends more on investors’ feelings than the business performances of listed companies.
Stock prices can increase or decrease by 25 percent a week, while a miraculous growth rate for a company would be 50 percent a year, and a growth rate of a nation 10 percent. The experts say that capital from banks should go to production and business to create jobs and stimulate production.
Banks well understand the risks of securities loaning and they themselves apply necessary measures to minimise risks. In fact, though banks have been trying to lure more clients, not everyone can access the bank loans as they cannot meet the requirements set by the banks.
Lien Viet Bank only accepts 80 listed share items and several OTC share items as mortgaged assets for loans. Eximbank accepts 30 share items, and the values of loans cannot be higher than 30 percent of the shares’ market values or three times more than the shares’ face values. The bank only gives loans for three months at the interest rate of 0.83 percent a month.
Hoang Xuan Quyen, Deputy General Director of Tan Viet Securities Company, said that the plan by the central bank, if approved, would have big impacts on the stock market, because investors would lack an effective ‘financial lever’. Meanwhile, banks would have to take measures to try to get back the sums of money they had already lent.
The draft law on credit institutions says that banks are not allowed to directly loan to fund securities investments nor accept mortgages in securities. It has been asked if banks would be able to fund securities investments in an indirect way. Could they cooperate with securities companies and provide financial services through the companies? If banks were not allowed to cooperate with securities companies under the banks, would they be able to join forces with other securities companies?
Experts have called for a solution that ensures the safety of credit institutions and supports the stock market.
VietNamNet, DTCK
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