Syndicated lending proposed to reduce impacts of loan limit policy

A bank teller counts money at a transaction office in Hanoi. (Photo: congthuong.vn)

A new regulation on reducing the loan limit under the amended Law on Credit Institutions will adversely affect capital supply for enterprises so commercial banks should cooperate in providing syndicated loans for businesses, experts said.

At a dialogue held by Vietnam Investment Review on March 11, experts said under the Law on Credit Institutions, which will take effect from July 1 this year, banks must reduce the loan limit for a customer from 15% to 10%, and for a customer and their related parties from 20% to 15% according to a roadmap from July 1, 2024 to January 1, 2029.

Dr. Pham Xuan Hoe, former Deputy Director of the State Bank of Vietnam (SBV)’s Institute of Banking Strategy, said at the dialogue that the new regulation in the law will definitely affect enterprises.

According to Hoe, the capital of large and medium-sized banks is currently about 70-80 trillion VND and 35-50 trillion VND, respectively. Thus, if the credit limit is reduced to 10%, customers can borrow only about 5 trillion VND, which is not enough for real estate, infrastructure and energy enterprises with huge capital demands. Therefore, projects with investment capital of more than 5 trillion VND must think about syndicated loans.

Besides, the credit limit regulation for a customer and their related parties under the law also has a very broad meaning. For example, a corporation has many independent subsidiaries, or related parties, so the credit limit of a bank for the corporation is also limited.

Therefore, Hoe said, to implement this regulation, the SBV needs to very clearly define the roles and tasks of State management agencies. Commercial banks also need to review very carefully, especially large customer groups, so as not to encounter difficulties when implementing the new regulation of the law.

He said the business culture of commercial banks needs to change, with an aim to enhance the cooperation to share both benefits and risks.

To lighten the impact of reducing the credit limit on enterprises, Nguyen Quoc Hung, General Secretary of the Vietnam Banks Association (VNBA), suggested that banks should cooperate to co-finance good projects.

A bank, whose customer has outstanding debt exceeding the regulated credit limit, needs to proactively invite other banks to participate in co-financing the customer’s projects, Hung said.

If the project is good, it is possible to ask other banks to co-finance it, Hung proposed.

In addition, syndicated loans with the participation of more than one bank in managing and evaluating projects also help increase the transparency and efficiency of the projects, he said.

Hung believed the five-year roadmap from 2024 to 2029 for banks to reduce credit limits is appropriate. He expected that banks will unite to deploy lending so that all people and enterprises can have access to bank loans and there need be no fear of lack of capital for large projects./.