On 13 February 2012, Governor of the State Bank of Vietnam issued Direction 01 on implementing monetary policies and ensuring the safety and efficiency of the banking system, as well as solutions for credit management in 2012.
Accordingly, the State Bank of Vietnam (SBV) set up credit growth targets for 4 credit institution groups, particularly 17 percent for group 1, 15 percent for group 2, 8 percent for group 3 and group 4 is allowed no credit growth.
After six months of execution, the SBV will revise and adjust its credit growth targets to make them feasible with changed monetary policy, credit, and banking activities, and to assure monetary policy targets.
As a result, instead of applying the flat standard of 20 percent for every credit institution as in 2011, SBV has applied different credit growth allowances for different groups. The credit growth target of 15 percent to 17 percent is the highest level. However, there is no specific information about these groups.
Furthermore, Governor of SBV carried out Document 674/NHNN-CSTT for every credit institution and branches of foreign banks to revise their credit activities and implement Direction 01.
Accordingly, based on the credit growth target for every group of credit institutions, SBV requires credit institutions to build up the plan and seriously take into account implementing the credit growth control in 2012 (including the element of exchange rate adjustment).
Regarding Clause 14, Article 4 of the Law on Credit Institutions and Circular 21/2010/TT-NHNN dated October 8th 2010, credit balance is determined by the sum of credit contingency, purchased corporate bonds (excluding bonds issued by credit institutions, but including bonds in the initial public offering and in the secondary market), and credit from the entrusted funds of another organizations (excluding credit institutions).
In terms of the credit growth plan in 2012, credit institutions need to build implementation plans every quarter; commissioning credit growth plans for every quarter and the whole year for their branches, together with sending them to SBV as well as its branches.
The ratio of “not recommended” credit limitation
The market is currently concerned about the credit growth standard for non production sectors, whether or not it will remain at 16 percent. With the information published on 13th February 2012, SBV stated that credit institutions need to control credit activities of the “not-recommended” sector (not mentioning the “non-production” concept). Particularly, credit institutions (excluding financial companies certified by SBV to operate mainly on consumption credit) need to manage their credit ratio for the “not-recommended” sector at the level of 16 percent of their total credit in 2012.
In detail, credits for “not-recommended” sectors include: credit for trading securities, (with the exception of credit for State-owned enterprises’ employees to purchase securities on initial public offering when it is equitised; credits to serve life and for the issuance and use of credit cards (or “credits for consumption”), with the exception of credit for building, constructing and purchasing housing which will be repaid from employee salaries; credit for investments and real estate business, which excludes credit for capital needs for certain capital requirements (building houses for sale or lease to low income workers in industrial parks, export processing zones, economic zones; constructing housing for workers in industrial zones without collecting rent or collecting rent not exceeding the norm of house rent accepted by provincial People’s Committee, under the condition that construction and rental costs are considered reasonable costs of operating expenditures when income tax is measured; construction projects, nearly completed houses that will be soon be delivered or put into use in 2012 according to construction contracts between project owners and contractors, as well as contracts of selling and buying assets, housing purchases, property leasing).
If a credit institution has excessive credit growth and/or a high outstanding loan ratio for “not recommended” sectors, the SBV will double its required reserve ratio for deposits in VND and use other measures to limit the scope of its activities.
VNE
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