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SBV announces draft circular on risk ratio of property- and stock-backed lending
The State Bank of Vietnam plans to reduce the risk ratio for property-backed and securities-backed lending from 250% to 150% and raise the loan/deposit of banks from 80% to 90% and of financial firms from 85% to 100%.
This was one of important contents in the draft to amend and supplement some clauses of Circular No 13/2010/TT-NHNN dated May 20, 2010. As scheduled, the amended circular will be effective from June 1, 2012.
Some changes in the draft circular:
- Surplus from share offering and general backup fund can be taken into equity;
- Real value of charter capital must be lower than authorized (legal) capital. The new circular rules that if the charter capital is 10% lower than legal capital, credit institutions will be limited in operation, and if lower 20%, the institutions will have to restructure;
- On the basis of Circular 13, minimum Capital Adequacy Ratio (CAR) is controlled at 9%;
- Risk ratio of property and securities-backed lending is lowered from 250% to 150% due the current stock and real estate market is facing a lot of hardships;
- Outstanding loans and deposits on the market 1: Outstanding loans exclude investments in bonds allowed to be traded with the State Bank of Vietnam (SBV). This move aims at encouraging credit institutions to keep this kind of bonds. The loan/deposit ratio (LDR) of credit institutions, branches of foreign banks is increased compared with Circular 13. In particular, the ratio for banks as well as foreign bank branches is raised from 80% to 95%, for financial companies from 85% to 100%.
Credit line is also modified:
- The credit line of commercial banks, foreign bank branches for securities trading investment must be no more than the periodic limit of the SBV.
- Banks and foreign bank branches are not allowed to receive the mandate of representative rights from shareholders for the shares which customers bought from loans or bank loan-original loans.
Capital contribution to enterprises:
- Banks (including subsidiaries and associated companies) are permitted to contribute capital or buy shares at over 11% charter capital of one enterprise. Total capital contributed must be no more than 40% of charter capital and reserve fund of banks. The ratios for financial companies and subsidiaries of financial firms are ruled at 11% and 60% respectively.
- Contributing into other supervised credit institutions and enterprises: banks, financial companies are not allowed to contribute capital, buy shares of other enterprises and credit institutions who are their shareholders.
- Banks and related people, financial companies and related people are not allowed to contribute capital or buy shares of their own affiliates and associated companies.
- Banks are permitted to buy or hold shares at maximum ratio in no more than 2 other credit institutions. Share holding ratio of credit institutions in another credit institution is controlled at 20%, except special cases with the SBV’s approval.
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