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Banks have money, but can’t lend
Earlier this year, experts feared that the credit boom would break the credit growth rate cap of 20 percent set up by the State Bank of Vietnam in an effort to curb inflation. However, they now fear that the 20 percent growth rate would be unreachable.
The problem is that some joint stock banks, who have profuse capital to lend, and have many reliable clients, cannot lend, because their outstanding loans have nearly hit the ceiling of 20 percent. Meanwhile, other banks, though still having a “quota” to lend, do not have capital to lend, because they dare not raise the deposit interest rates in order to attract more deposits.
The other side of the coin
According to a general director of a joint stock bank, when the State Bank sets up the cap of 20 percent in credit growth rate in 2011, this means that the total outstanding loans of the banking system must not be higher than 461 trillion dong.
In the first seven months of the year, only seven percent of the “quota” has been used, or 165 trillion dong has been lent. This means that banks still have the “quota” of 13 percent, i.e they can lend 300 trillion dong more.
The figures make policy makers optimistic, because this means that the national economy still has enough “blood” to run, while the inflation has been curbed, and everything is still within the control.
However, according to Thoi bao Kinh te Vietnam, of the four biggest commercial banks which are holding 50 percent of the market share, three banks cannot provide more loans, for some reasons.
First of all, their capital balancing is technically problematic. They have lent more than allowed. For example, while they are only to lend 8 dong out of the 10 dong they mobilized, they have lent 9 or 10 dong already
Thoi bao Kinh te Vietnam has quoted its source as saying that one of the bank mobilized 450 trillion dong in capital, but it has lent 423 trillion dong. The worrying thing is that it could only mobilize 300 trillion dong from the public and it used 123 trillion dong mobilized from the interbank market to lend. This clearly violates the current regulations.
Secondly, the banks have found it very difficult to mobilize capital from the public. Unlike joint stock banks, which offer high interest rates to attract deposits, the banks did not dare to mobilize capital at the interest rates higher than 14 percent as stipulated by the State Bank. As a result, they have been facing the serious capital shortage.
“It is clear now that the 20 percent credit growth rate goal is impossible. In order to push up lending, we need to have capital, while it is very difficult to attract deposits with the interest rate of 14 percent per annum,” a banker said.
Nevertheless, the paradox is that while giant banks cannot lend money because of the lack of capital, joint stock banks have much capital, but they cannot lend.
Analysts believe that the thing that big banks need to do now is to try to take back short term capital. If they do, they would not violate the current regulations on the safe ratios of lending, while they would help the banks with profuse capital to push up lending.
What to do?
The banks with excessive capital have been trying to “rescue themselves” by persuading businesses to issue corporate bonds, which, by the nature, is a way for banks to lend to the businesses.
However, banks have been warned that the method would not be applied for ever, because it is very likely that the State Bank would consider this a kind of credit.
In principle, banks can use their excessive capital to buy government bonds. However, banks have not chosen this way, because the government bond interest rates are too low in comparison with the inflation, which cannot bring profits to the banks.
Some analysts have suggested that the State Bank should consider granting more quotas to the banks with excessive capital, while lowering quotas for the banks which lack capital. However, the proposal has not been welcomed.
vietnamnet, TBKTVN
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