Vietnam Again Requests Banks to Obey Rules on Safety Capital Ratios

The State Bank of Vietnam, the country’s central bank, on November 1 requested credit institutions to strictly comply with regulations of recent two circulars on safety capital ratios, in a move to ensure safety of the local banking system.

 

All branches of the State Bank must promptly report any related violations at local credit institutions to the central bank, the SBV Governor said in a document.

 

The Circular No. 19 that amends and supplements the controversial Circular No. 13, meanwhile, has eased the loan-to-deposit ratio regulations, allowing local banks to lend up to 25% of their non-term deposits by economic organizations, excluding those of other credit institutions.

 

The SBV will permit local banks to count their loans on a three-month or longer term basis with other credit institutions into their lendable funds, except loans to make up for temporary shortage of liquidity ratios.

 

Local banks will also be entitled to lend funds raised from bonds and certificates of deposit. This move is expected to free up the inter-bank market and provide more capital to banks.

 

Other regulations in the Circular No. 13 are kept unchanged with the capital adequacy ratio (CAR) for local banks to be raised to 9% from current 8%.

 

The central bank continues to restrict banks from lending more than 80% of their total deposits. It still sets a 250% risk coefficient for all loans to securities and real estate.

 

Almost all analysts have expected such amendments would help bring down lending interest rates. Local banks, however, still offered loan rates at interest rate of as high as 12%-16% per annum, discouraging local firms to take out loans. (SBV, VnEconomy)