Relax short-term capital tightening roadmap for medium and long-term loans: Ensure long-term benefits

VCN- The State Bank of Vietnam (SBV) has decided to delay the tightening of short-term capital for medium and long-term loans by one year despite conflicting opinions. However, this will be more beneficial to facilitate banks to better support customers to borrow capital to restore production and business.
relax short term capital tightening roadmap for medium and long term loans ensure long term benefits Committee to disburse ODA, foreign loans after returning nearly VND4,100 billion
relax short term capital tightening roadmap for medium and long term loans ensure long term benefits State Treasury: Mobilise funds effectively, saving loan charges for State budget
relax short term capital tightening roadmap for medium and long term loans ensure long term benefits Promote capital disbursement from ODA, foreign concessional loans
relax short term capital tightening roadmap for medium and long term loans ensure long term benefits
The delay of the deadline for the capital ratio will greatly support the operation of the entire banking system.

Appropriate to the context

According to Circular No. 08/2020/TT-NHNN amending and supplementing a number of articles of Circular No. 22/2019/TT-NHNN prescribing prudential limits and ratios for operations of foreign bank branches, the roadmap to reduce the maximum rate of using short-term capital for medium-term and long-term loans has been delayed by one year.

Specifically, from January 1, 2020 to September 30, 2021, the applicable rate is 40%. From October 1, 2021 to September 30, 2022, it will decrease to 37%. From October 1, 2022 to September 30, 2023, it will decrease to 34% and from September 1, 2023, it will be 30%.

In the previous draft, the State Bank proposed two options for delaying this rate, the first one is an extension of six months and the second is one year compared to the provisions of Circular 22.

According to the State Bank's explanation, the Covid-19 pandemic has been complicated, seriously affecting all socio-economic aspects, making trade, tourism, transport and import-export sectors fall into difficult circumstances. Enterprises are facing the risk of lack of production materials, downsizing and suspending operations. Therefore, it is necessary to consider delaying the roadmap of short-term capital for medium and long-term loans to facilitate credit institutions to better support customers to borrow capital to restore their production and business after the pandemic.

According to the State Bank, if following the old roadmap, the reduction of the maximum proportion of short-term capital for medium and long-term loans from 40% to 37% from October 1, 2020 may lead to difficulties in banks’ capital structure plan. Additionally, due to the pressure of the Covid-19 pandemic on production and business activities, the amount of customers’ deposits at banks is expected to decrease.

According to analysts at the Economic Research Center - MSB Bank, this new roadmap is reasonable in the current context. In fact, the debt restructuring may cause the outstanding balance to shift from short-term to medium or long-term, affecting the credit institutions' loan structure. The liquidity of the banking system is abundant, proving that the ratio of short-term capital for medium and long-term loans is not a problem, but delaying the roadmap will remove some difficulties for credit institutions, if they want to support more businesses.

Currently, although banks are gradually preparing to meet the requirements of Circular 22, many of them still believe that it is not easy to meet the roadmap set by Circular 22 due to the adverse effects of the pandemic on the market. Therefore, the delay of the deadline for tightening the capital ratio in this Circular will greatly support the operation of the whole system.

Concerned about capital flows into risky fields

In fact, this is not the first regulation that has been delayed or missed compared to the original decision by the State Bank. For example, with a foreign currency loan to pay abroad for the import of goods and services to implement the production and trading plan for domestic needs, the State Bank has also delayed and loosened the decision several times after accepting the recommendations from enterprises, and then it was officially stopped until the end of September 2019.

Therefore, although the decision to delay the tightening ratio of short-term capital for medium and long-term loans by one year was considered appropriate, many experts disagreed and believed that this could have negative effects on the enactment and enforcement of laws. Some experts even said that the State Bank should limit the delay in implementing legal regulations to avoid "disregard" of the law, and only use it in urgent cases.

Objectively, many banks are not short of capital, even in a state of capital surplus. However, "slow" credit growth is creating a difficult situation for banks when bad debt tends to increase.

Moreover, the interest rate is currently at a very low level, and the interest rates in the priority sectors have decreased by 1% per year compared to the end of last year. According to the SBV's preliminary calculations, the total outstanding loans of the entire banking system affected by the pandemic amounted to VND2 trillion, accounting for about 23% of the total outstanding loans, potentially risky with banking operations. Therefore, the report of the Economic Research Center - MSB Bank said that if the lending rate was not tightened in the context that the interest rates were down and business and production activities were difficult, medium and long-term capital would flow into risky areas such as securities and real estate.

relax short term capital tightening roadmap for medium and long term loans ensure long term benefits Some banks recall bad debts

VCN – Most financial reports in 2019 of banks are unqualified opinion. However, there are still cases ...

Therefore, many experts said that even if the Covid-19 pandemic continued to affect the economy in the future, regulators should control and limit short-term capital for medium and long-term loans to ensure healthy credit activities and result in long-term benefits.

By Huong Diu/ Ha Thanh

Related News

Unlock capital flows and create favorable conditions for investors

Unlock capital flows and create favorable conditions for investors

VCN - Talking with the press, Dr. Ngo Cong Thanh (Photo), Provisional Executive Committee member of the Vietnam Industrial Park Finance Association (VIPFA), said that it is necessary to open up capital flows and create conditions for investors to access key factors. Facilitate production and business factors and innovate investment promotion activities to more effectively develop industrial parks.
Shareholders expect the shareholder meeting season

Shareholders expect the shareholder meeting season

VCN - From mid-March to April this year, many banks have planned to organize their annual general meetings of shareholders (AGM). Accordingly, information about dividend distribution or profit targets always attracts the attention of shareholders, especially when many new plans are proposed this year.
Credit and access to credit: A problem for banks and businesses

Credit and access to credit: A problem for banks and businesses

VCN - Since the beginning of the year until now, the Prime Minister, the Government and the State Bank (SBV) have continuously issued instructions to promote credit, but the situation of banks having excess cash and businesses lacking capital is still a concern of the economy.
The Minister of Finance chaired the Vietnam - Korea Financial Investment Promotion Conference

The Minister of Finance chaired the Vietnam - Korea Financial Investment Promotion Conference

VCN - On March 7, in Seoul Capital, South Korea, the State Securities Commission (SSC) organized a financial investment promotion conference with the theme "Vietnam - Investment destination". Minister of Finance Ho Duc Phoc attended and chaired the Conference.

Latest News

Central bank urges card issuers to review procedures

Central bank urges card issuers to review procedures

The State Bank of Vietnam (SBV) has issued a directive, demanding commercial banks to review their procedures in issuing and managing bank cards.
Warning about impersonating tax authorities to commit fraud during  tax finalization month

Warning about impersonating tax authorities to commit fraud during tax finalization month

VCN - The Tax industry has continuously provided information and issued warnings about impersonating tax officials and tax authorities to commit fraud against taxpayers, but there are still people who fall into the trap of these fraudsters, especially during the peak month of tax settlement.
“3 priorities, 3 breakthroughs” in task deployment of State Treasury

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

VCN - To complete the task from now until the end of 2024 and successfully implement the State Treasury Development Strategy as planned, Deputy Minister of Finance Bui Van Khang stated "3 priorities, 3 breakthroughs" " and 7 notes in task performance.
Effectively apply M&A to go long distance

Effectively apply M&A to go long distance

VCN - With advantages such as being cheaper than domestic capital, and accompanied by many factors such as technology, skills, management, market... foreign capital is a popular trend among businesses. Domestic enterprises seek through M&A activities to ensure sustainable development for the future.

More News

Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury proactively digitizes and transforms operating methods

VCN - Hanoi State Treasury always proactively transforms and reforms its operating methods with the motto of “taking customers as the center” and taking the satisfaction of organizations and individuals as a measured level of task completion by civil servants.
The Ministry of Finance continues to strongly improve the business environment, reducing the rate of businesses temporarily suspending operations

The Ministry of Finance continues to strongly improve the business environment, reducing the rate of businesses temporarily suspending operations

VCN - The Ministry of Finance aims to continue to strongly improve the business environment, create a healthy competitive environment, rapidly increase the number of newly established businesses, and reduce the rate of businesses temporarily suspending operations; reduce input costs and legal compliance costs in investment and business activities, reduce policy risks, strengthen trust, create a fulcrum for recovery and improve business resilience.
Vietnam tackles obstacles to stock market upgrade

Vietnam tackles obstacles to stock market upgrade

Vietnam's ambition to elevate its stock market from "frontier" to "emerging" status by 2025 faces two key hurdles, including pre-trade margin requirements for foreign investors and foreign ownership ratios in certain sectors, said Deputy Director of the Securities Market Development Department under the State Securities Commission (SSC) Pham Thi Thuy Linh.
Looking forward clear instructions in tax finalization in 2023

Looking forward clear instructions in tax finalization in 2023

VCN - Mr. Hoang Quang Phong (photo), Vice Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) discussed supporting taxpayers in tax finalization in 2023.
Proactive in dealing with exchange rate pressure

Proactive in dealing with exchange rate pressure

VCN - Recently, the State of Bank (SBV) withdrew VND 30,000 billion through the T-bills channel, contributing to reducing exchange rate pressure. This is just one of the moves of the monetary policy management agency to stabilize the foreign exchange market, contributing to supporting the macro economy as well as import-export business activities of enterprises.
Tax sector accompanies and supports tax finalization

Tax sector accompanies and supports tax finalization

VCN - In the first months of 2024, the Tax sector has deployed peak months to support tax finalization in many different forms, thereby solving many problems in settlement of corporate income tax and personal income tax for taxpayers.
Minister of Finance: Fairness and transparency for the insurance market

Minister of Finance: Fairness and transparency for the insurance market

VCN - According to Minister of Finance Ho Duc Phoc, the Ministry has strengthened inspections to correct violations in the insurance sector, demonstrating fairness and transparency in the market.
Vietnamese securities companies race to boost capital amid high market demand

Vietnamese securities companies race to boost capital amid high market demand

These companies understand the importance of boosting their capital to remain competitive and avoid falling behind their peers.
Central bank required to take urgent measures to stabilise gold market

Central bank required to take urgent measures to stabilise gold market

The Government has directed the State Bank of Vietnam (SBV) to urgently inspect and supervise to stabilise the gold market.
Read More

Your care

Latest Most read
Central bank urges card issuers to review procedures

Central bank urges card issuers to review procedures

The State Bank of Vietnam (SBV) has issued a directive, demanding commercial banks to review their procedures in issuing and managing bank cards.
Warning about impersonating tax authorities to commit fraud during  tax finalization month

Warning about impersonating tax authorities to commit fraud during tax finalization month

VCN - The Tax industry has continuously provided information and issued warnings about impersonating tax officials and tax authorities to commit fraud against taxpayers, but there are still people who fall into the trap of these fraudsters, especially dur
“3 priorities, 3 breakthroughs” in task deployment of State Treasury

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

To successfully implement the State Treasury Development Strategy as planned, Deputy Minister of Finance Bui Van Khang stated "3 priorities, 3 breakthroughs" " and 7 notes in task performance.
Effectively apply M&A to go long distance

Effectively apply M&A to go long distance

VCN - Sharing at the conference "Consumer goods and distribution industry: M&A trends and investment strategies to raise capital for Vietnamese enterprises", organized by the Business Association of High Quality Vietnamese Goods and the Leading Business C
Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury always proactively transforms and reforms its operating methods with the motto of “taking customers as the center” and taking the satisfaction of organizations and individuals as a measured level of task completion by civil servants.
Mobile Version