HCMC – The central bank on Monday evening issued a new circular amending Circular 13, but it made little changes to the highly-controversial legal document on safety ratio for banking operations.
In the new document coded Circular 19/2010/TT-NHNN, the State Bank of Vietnam allows banks to calculate 25% of non-term capital deposited by companies as mobilized funds, meaning this capital can be used to make loans. In Circular 13, such deposits cannot be used for loans.
In addition, capital borrowed from other credit institutions with a term of three months or more, and capital borrowed from foreign banks will also be added into mobilized funds for lending. The amount of loans underwritten by a bank will not be considered its own loans under the new amendments.
These changes will help increase the amount of mobilized funds of credit institutions, and is seen a quantitative easing measure by the central bank in response to complaints by banks over Circular 13 as a monetary tightening policy.
The new changes came forth following instructions from the Government, asking the central bank to rethink Circular 13 issued in May this year.
Last Friday, the Prime Minister sent a fresh document to the central bank asking the governor to adjust Circular 13 based on proposals of the National Financial Supervisory Commission. The central bank was also told to assess the real financial market situation, capital raising process of banks, and the Government’s policy on decreasing interest rates.
Apart from aforesaid changes, the new circular still sticks to the loans-to-deposit ratio of 80% for commercial banks, and 85% for non-banking credit institutions. Besides, the central bank also upholds its stance about the risk coefficient at 2.5 for stock and real estate loans, thus restricting the cash flow for these two sectors.
The capital adequacy ratio (CAR) will be also unchanged at 9%. The effective time of new regulations is kept unchanged at October 1 although lenders and the National Financial Supervisory Commission said that was too hurried.
Earlier, the National Financial Supervisory Commission submitted a proposal to the Prime Minister suggesting methods to amend Circular 13.
Le Xuan Nghia, vice chairman of the commission, in a seminar last week in HCMC showed opinion that the Circular 13 was even stricter than the new international safety standard of Basel III. He also objected regulations on CAR, loans-to-deposit, and risk coefficient for stock and real estate loans, as well as time to meet those requirements.
Nghia said given strict regulations on safety in banking operation, the desire of lowering deposit and lending rates of the Government would be far away from reality and enterprises would find it harder to access banks’ loans.
In early August, Vietnam Banks Association representing 14 credit institutions sent a nine-page proposal asking the central bank to amend many things in the Circular. However, the amended regulation meets just a small part of the demand of credit institutions.
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