Banking expert clarifies reasons behind six-month credit growth

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According to the State Bank of Vietnam, the banking sector reported the credit growth of 7.33 per cent in the first half of 2019 in comparison with late 2018.

The ratio was also higher than that of the corresponding period last year which saw the credit growth of 6.14 percent.

Exports, along with the processing and manufacturing sector, were considered as major contributors to the six-month credit growth.

Can Van Luc, senior expert of the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), spelled out two key reasons for the credit growth.

Firstly, every June banks and firms seek to mobilize loans and close accounting books for the first half of the year in order to complete their six-month business reports.

Banks and listed companies must then have these reports audited. The audited reports serve as a significant reference for credit institutions and investors.

Another reason is that the second quarter of 2019 saw a number of commercial banks begin to apply the minimum capital adequacy ratio under Basel II standards. In turn, the central bank enlarged credit growth quotas set for these banks, thus facilitating them to increase credit growth during the reviewed period.

The credit growth rate of 7.33 per cent is not concerning, Luc said, adding this rate stays compatible with current financial developments and the implementation of the full-year target of credit growth.

Liquidity in the banking sector now remains steady, yielding no significant pressure on banks to mobilize capital.

However, in the medium to long term, many commercial banks are forecast to face pressure to raise capital in order to follow a scheme aimed at reducing short-term capital used for long - term loans and increase their tier 2 capital in line with Basel II standards.