Credit institutions asked to tighten loans in “overheating” sectors: SBV

A client makes a transaction at a branch of Vietcombank in Hà Nội. SBV requests local credit institutions and foreign banks’ branches to restrict lending concentration for the real estate and construction. — VNA/VNS Photo Trần Việt

The State Bank of Vietnam (SBV) has requested local credit institutions and foreign banks’ restrict lending concentration for real estate and construction, Build-Operate-Transfer (BOT) and the consumption sector.

After an investigation, potential risks have been found in several credit institutions that have provided lending to investment and trading in real estate and/or securities, according to SBV.

It reports that non-performing loan ratios of some credit institutions are higher than previous years.

The credit for the real estate sector accounts for a large ratio in the non-performing loans. Investment in corporate bonds for the use of real estate development and trading also accounts for a high proportion of loans.

The State Bank requires all credit institutions to strictly oversee loan use purpose and the disbursement of credit for large-scale real estate projects. In addition, commercial banks must strengthen supervision and risk prevention measures. They are asked to carefully consider providing loans for real estate projects in “overheating” areas with potentially high risks.

Regarding lending for the needs of daily life, the SBV asks all credit institutions to carefully review those who are eligible for loans to avoid creating risks and strengthen supervision of the use of loans.

Credit institutions must also arrange capital sources to offer borrowers for the demands of their daily life and monitor lending quality for consumption purposes and strengthen activities of internal audits.

Concerning lending for securities, commercial banks must control the growth rate of outstanding loans for securities investment and trading to avoid risks. Banks are required to comply with regulations on credit granting criteria and trading of shares, corporate bonds and other related legal regulations.

For Build-Operate-Transfer (BOT) and Build-Transfer (BT) projects, credit institutions must balance their capital flow and use loans for medium and long-term projects to limit liquidity risks and continue to strictly comply with the instructions of the SBV.

The State Bank also requires credit institutions strengthen inspections and supervision of the use of loans and corporate bond issuance to ensure the proper use of investment capital and regularly monitor and uncover any unusual signs.

The State Bank is asking commercial banks to continue improving credit quality and actively handle bad debts and implement classification of assets, levels and method of setting up of risk provisions, and use of provisions against credit risks in the banking activity of credit institutions, and foreign banks. — VNS