Banks granted credit room

VCN - According to the Vietnam Confederation of Trade and Industry (VCCI), the credit growth limitation is one of the most influential policies in the banking system of Vietnam, but its legal basis is not very thin.
The SBV will review to consider and adjust the appropriate credit growth target. Source: Internet
The SBV will review to consider and adjust the appropriate credit growth target. Source: Internet

So far, the market has been flooded with information that a series of commercial banks have been granted credit growth limits (room) by the State Bank (SBV) for the first time in 2023, most of which at a lower rate year on year.

Specifically, the granted credit growth of some banks is HDBank at 11%, down from 15% in 2022; ACB at 9.8%, also 10% lower than in 2022; VIB at 9.5%, compared to 10% last year; TPBank at 9.1%, 11.5% lower than 2022; VPBank and MBB share the same rate of 9%, 15% lower than the previous year; MSB is 13.5%, higher than last year at 9.5%.

Taking to the press, a representative of the State Bank said that the above numbers are basically correct.

According to the SBV, the credit growth targets of each credit institution are separately announced by the SBV and managed according to "intra-information".

The basis for granting credit room is based on many factors including the result of grading credit institutions up to the latest time as prescribed in Circular No. 52/2018/TT-NHNN dated 31 December 2018 (amended and supplemented); the ratio of credit balance to the 100 customers with the largest outstanding balance, interest rates, participation in supporting the handling of weak credit institutions (weak banks, weak people's credit funds), and actual market practice.

In 2023, the State Bank orients that credit growth will be around 14-15%, with adjustments in line with actual developments.

In 2022, the State Bank issued four rounds of credit room granting, of which three are conducted selectively in the last months of the year to ensure capital inflows into priority areas and control risks. This is a mechanism that has been applied by the State Bank since 2011.

The State Bank also repeatedly emphasized that it will regularly monitor and supervise the implementation of credit growth targets of each bank. On the basis of the macroeconomic situation, market developments, and the request of credit institutions, the State Bank will review to consider and adjust the appropriate credit growth target.

In addition, the State Bank of Vietnam always requires commercial banks to reduce costs and further reduce deposit interest rates in order to reduce lending rates. Reducing interest rates is also one of the criteria for the SBV to consider granting more credit room to banks.

However, in the written response to the official dispatch of the State Bank of Vietnam on the request for comments on the application for the development of the Law on Credit Institutions (amended), VCCI said that the legal basis for the policy of limiting growth credit is still very thin.

This regulation is not clear whether this credit growth restriction measure will be applied widely, to all credit institutions every year or only to some credit institutions that are detected of high-risk or illegal behavior, through inspection and monitoring.

In addition, through the review of the VCCI, there is currently no more specific regulation on this issue, which leads to uncertainty, and even risk of arbitrariness in the allocation of credit growth limits to commercial banks.

Therefore, VCCI proposed the drafting agency add regulations on credit growth restriction policy to this draft law and submit it to the National Assembly for a decision.

In addition, some banking experts have also expressed concern that the use of the credit room tool may cause unfair competition among banks, which is an administrative measure.

At the same time, it must balance with the inflation level to set a reasonable growth threshold. Therefore, the SBV can manage credit through technical tools such as capital adequacy ratio (CAR), LTD index (credit balance/mobilized capital), liquidity ratio, and short capital ratio for medium and long-term loans, and can regulate the money supply to the market through adjusting the operating interest rate.

By Hương Dịu/ Thu Phuong

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