Central bank makes little change to Circular 13

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.

Related Articles

• Central bank makes little change to Circular 13
• VietABank to issue 137 million shares
• Banks scramble for mid-level managers
• Greenback firmer on signs of rising demand
• A brighter economic future

Central Bank redefines circular

Banks will be allowed to lend up to 25 percent of their non-term deposits.

They will also be allowed to count their deposits at the State
Treasury and loans on a three-month or longer term basis with other
credit institutions as part of their reserves for lending. These
regulations are congruent with Circular No19/2010/TT-NHNN issued by the
State Bank of Vietnam last night to supplement Circular No 13.

The original circular would have restricted banks from issuing loans
from non-term deposits lodged by the State, State entities, the social
insurance fund or commercial credit organisations.

Banks now will also be allowed to lend funds raised from bonds and
deposits certificates. These moves are expected to free up the
inter-bank market and provide more capital to banks.

These regulations will come into effect on October 1.

Other regulations in the Circular No13 are kept unchanged as it
continues to prohibit banks from lending more than 80 percent of their
deposits. It also sets a 250-per-cent risk coefficient for all loans
secured against securities or real estate.

The capital adequacy ratio, CAR, for Vietnam 's banks is lifted to 9 percent – from 8 percent.

The central bank reported last Friday that 10 of 12 banks in Hanoi
have already raised their CAR to 9 percent. The other two would try to
meet the requirement before Friday.

National
Financial Supervisory Council deputy chairman Le Xuan Nghia said in an
economic seminar last week, "It's appropriate that the regulations in
the circular are close to the Basel 3 standards but it is unnecessary
for them to be stricter than Basel 3."

Basel
3 sets CAR at 8 percent and risk coefficient for all loans secured
against securities or real estate at 150 percent.

Deputy chairman Nghia worried that implementation of Circular No 13
would have a detrimental effect on the capital, securities and property
markets.

The Government said the purpose of Circular
13 was to ensure financial market stability and well-managed capital
circulation in the latter part of this year and early next year.

Some banks pledged at a meeting of the Vietnam Banks Association in
HCM City last week to simultaneously cut deposit interest rates 0.4
percentage points to 11 percent as soon as next Friday and no later than
October 15 if the amended circular came into effect.

Circular 13 is intended to address shortcomings in various risk-management provisions.

The Fullbright Economics Teaching Programme's Professor Huynh The Du
argues the changes proposed in the circular are necessary to Vietnam
's financial system.

The 9 percent CAR and a 250
percent risk coefficient would improve financial stability and prevent
banks from entering too deeply into risky lending, he said.

But Nghia said that the solutions to the pivotal problems of Vietnam
's financial market were not confined to a higher CAR but accurate
accounting, financial statements and the valuation of assets.

The Prime Minister first ordered the central bank to review the
Circular 13 which is intended to govern bank reserves about six weeks
ago./.

Related Articles

• Central bank makes little change to Circular 13
• Banks scramble for mid-level managers
• Vietnam surpass Malaysia at Eximbank Cup
• Sept dollar credit growth up strongly in HCMC
• ANZ launches service to high-class clients

Ministry helps seafood firms out of woes

HCMC – The Ministry of Agriculture and Rural Development has modified a circular that imposes strict requirements on seafood temporarily imported for local processing and bound for foreign markets.

Circular 25, effective from early this month, is designed to restrict seafood imports to help reduce the country’s high trade deficit. But 99% of seafood imports by member companies of the Vietnam Association of Seafood Exporters and Producers (VASEP) are for export processing.  

Seafood processors have decried the circular, saying it is causing difficulties for their operations, and that they might be closed down if the status quo is maintained.

Under the new circular coded 51, the ministry will exempt food products temporarily imported for export from the quality registration requirement. Meanwhile, products imported for local sale are still subject to the old circular.

Tran Thien Hai, chairman of the Vietnam Association of Seafood Exporters and Producers (VASEP), said the new circular solved almost all difficulties faced by seafood processors.

Nguyen Quang Tuyen, general director of Cafico Vietnam Joint Stock Co., said the latest circular had virtually dealt with a petition the enterprises sent to the Government. 

According to VASEP, Vietnam imports around 150,000 tons of seafood material for export processing, bringing a 25% profit for local enterprises.

Related Articles

• More Vietnamese goods head for regional markets
• ASEAN role sought to resolve temple conflict
• Vietnam’s growth faces unclean energy threat: Finnish minister
• Foreign sea leases deprive locals of living
• Seminar seeks to increase handicraft exports to Japan

Guidelines for realty market to come out soon

HCMC - The Ministry of Construction will issue a long-awaited guidance circular for a government decree governing the real estate market in the coming days.

The circular will provide much-needed guidelines for the implementation of Decree 71/2010/ND-CP which came into force on August 8.

“We are in the last stages of collecting comments from the relevant state agencies and realty firms before the circular comes out,” said Nguyen Manh Ha, head of the housing management department of the ministry.

Speaking at a seminar held in HCMC last week by the HCMC Association Real Estate to propose some revisions to the draft circular, Ha said the new decree was more liberal than the old one.

Real estate developers, according to the decree, can issue corporate bonds and raise capital from secondary investors in addition to funding from traditional sources such as banks and business partnerships.

Funds raised from these two channels before the foundation of a project is complete may account for up to 20% of the total number of property products. However, those products cannot be transferred until the foundation has been finished.

Banning developers from transferring the contracts on capital contribution results from the fact that many developers mobilize funds from customers but then delay their projects for three to five years, leading to their disputes with buyers.

The restriction on this kind of transfer will help prevent speculators from buying properties and changing hands shortly after that since this practice has been blamed for spikes in property prices.

Realty firms complained at the seminar that the new rule allows them to raise money from customers but restricts the transfer of properties bought through a capital contribution contract.

Related Articles

• More counterfeit products flood Vietnamese market
• More counterfeit products flood Vietnamese market
• Party reports come in from provinces
• Party leader welcomes Chinese comrades
• VN comes out on top at UPU letter-writing contest

Fish processors decry circular, say shutdown imminent

HCMC – Fish processors at a meeting in HCMC on Monday blasted the Ministry of Agriculture and Rural Development over a circular that imposes tough control on imported materials, saying many plants would face shutdown if the circular is not withdrawn.

Circular 25/2010/TT-BNNPTNT, which took effect last Wednesday, requires that food materials imported into Vietnam must be registered with quality control agencies in the countries of origin. These agencies then are required to send such registrations to the National Agro-Forestry-Fisheries Quality Assurance Department (Nafiqad) under Vietnam’s agriculture ministry.

At the meeting on Monday, local processors and the Vietnam Association of Seafood Exporters and Producers (VASEP) called on the Government and the ministry not to apply the circular, otherwise many plants will be closed down due to the lack of materials. They petitioned that the circular not apply to such imported materials as cod, salmon and tuna.

Tran Thanh Chien, vice chair of VASEP, told the meeting that as of Monday, only ten out of 80 countries and territories that exported fishery materials to Vietnam had agreed to observe the circular, as registered with Nafiqad. That means many contracted shipments cannot be delivered to Vietnam due to the new rule, Chien said.

The circular has been forwarded to Vietnam’s trading partners via their embassies, but many countries have not had their representatives in Vietnam, said Chien. Meanwhile, several economies like Thailand, Myanmar, and Taiwan have answered that they do not observe Vietnam’s circular because they have not asked for the same from Vietnam.

The agriculture ministry has explained that many countries worldwide have imposed regulations on Vietnam’s food products, so Vietnam is now doing the same to raise the stance of the country. But Chien of VASEP rejected the reasoning, saying the regulations may apply well with other food materials like cattle and poultry meat, but not fisheries.

The meeting on Monday heard numerous outcries.

Nguyen Xuan Nam, director of Hai Vuong Company in Khanh Hoa Province, said his company began to import fishery materials since 1999 for processing and export to other countries.

“To ensure jobs for 2,000 workers all year round, we have to import 70% of our demand for fish materials. If Circular 25 still prevails, we will have to close down our factories early next month as materials will run out by then,” Nam said.

Nguyen Pham Thanh, general director of Highland Dragon in Binh Duong Province, said his company needed 5,000 to 6,000 tons of tuna a month to produce canned food. “Now materials are enough for our processing until mid-September, and we will have to scale down production or shut down one or two factories,” he said.

Meanwhile, Cao Thi Kim Loan, director of  Binh Dinh Fishery Joint-stock Company, expressed concern that her company would have to pay compensation for partners when having not enough finished products for delivery.

In his petition sent to the Prime Minister, Nguyen Quang Tuyen, director of Cafico Vietnam, said the circular will only trim the material supply sources and thus eliminate competition, which will hit Vietnamese processors. That in the end will cut into the competitiveness of Vietnamese enterprises against rivals from China, the Philippines and Thailand.

Related Articles

• Chau Doc’s curried fish vermicelli: Bun nuoc ken
• Assoc insists on power price hike despite protests
• PM foresees bright future for co-operation with Africa
• Most ice is unhygienic
• VN, Cambodia courts step up cooperation