Vietnam's Banks Tighten Loans for Stock Offshoots

Domestic commercial banks will not be allowed to provide loans for their own securities affiliates to trade securities, according to the amended regulations on capital adequacy ratio in credit institutions.

 

Under the new regulations issued on January 19 by State Bank of Vietnam (SBV), commercial banks must not fund securities trading deals of affiliated securities companies. However, they can lend to securities companies that do not belong to the banks, but the loans must be mortgaged with assets.

 

Credit institutions must not lend and guarantee more than 10 per cent of their equity to affiliated securities companies, or 20 per cent their equity to other securities firms.

 

In addition, loans on securities investment, loans for securities companies for trading, and loans for buying shares of joint stock companies, will be listed on those for high-risk assets.

 

The SBV governor said the issuance of new regulation is necessary with aim to control securities trading activities of commercial banks, since banks have injected too much money in risky securities trading deals recently.

 

The State Bank will follow a discipline that lending must be a safe and transparent credit activity, Thuy said.

 

Kieu Huu Dung, head of the SBV’s Banking Department, said the decision is not interference into activities of commercial banks, but a warning about securities trading.

 

Local banks offering loans to their securities affiliates participate indirectly in risky securities trading, he said. (Vietnam Economic Times)