Banks Continue Loans on Securities

Some commercial banks continued expanding lending on stock collateral despite the volatility of the securities market in Vietnam over the past two months, a state media reported.

 

Trinh Thanh Binh, deputy director of the Vietnam International Bank (VIBank) said that his bank’s lending to securities investors has been kept stable, with the current loans to the sector accounted for some 5 per cent of its outstanding loans.

 

The bank was closely monitoring the stock market to readily require stock mortgagors to increase their mortgaged assets or to repay a portion of their loans if the value of the mortgaged stock falls 15 per cent within a week, Binh said.

 

Instead of lending to only bank shares as previously, VIBank has now provided loans against 29 different types of stocks ranging from shares in hydroelectric plants to insurance and information technology stock.

 

Asia Commercial Bank (ACB), meanwhile, reported its lending to stock mortgagors representing 1 per cent of the total assets, said the director Ly Xuan Hai, adding that there was no worries as the proportion is well below the safe threshold of 5 per cent.

 

The bank would adjust its lending rate if the value of mortgaged stock slid 25 per cent, he said.

 

ACB has also lent to more than 30 kinds of stocks, of which 20 were unlisted, six years since it began making loans against such collateral and there have not yet been any bad debts arising from such loans, he said, adding that lending on stock has proven more secure than on collateral of machinery and equipment.

 

However, the recent volatility of securities market has spurred the State Bank of Vietnam to draft guidelines for commercial banks on mortgage lending, said Nguyen Ngoc Bao, director of the State Bank’s Policy Department.

 

Lending on stock remained a risky investment and credit institutions should increase lending to production and enterprises instead of expanding lending to stock investors, Bao said.

 

Banks needed to apply stricter regulations on managing risk in stock mortgage lending, he added.

 

The value of many shares on the nation’s exchanges has fallen up to 30 per cent in the past two months. The VN Index has lost a heady 200 points since May.