According to the draft Circular specifying the safety limits and ratios in the operations of banks and foreign bank branches, banks are expected to gradually reduce the ratio of using short-term funds for medium and long-term loans in the coming years.
Specifically, banks may have to bring the maximum ratio to 35 percent by 2020 and 30 percent by 2021.
In 2019, banks must reduce the ratio of short-term funds used for medium and long-term loans to 40 percent instead of 45 percent as previously prescribed.
Report of Saigon Hanoi Commercial Joint Stock Bank (SHB) once assessed that the reduction of this ratio from 45 percent to 40 percent in the context when interest rates are still under much pressure and medium and long-term mobilisation is still facing numerous difficulties is a challenge for banks.
Nevertheless, reports of 20 banks showed that 14 banks announced this ratio at less than 40 percent by the end of 2018, including Nam A Commercial Joint Stock Bank (NamABank), Saigon Commercial Joint Stock Bank (SCB), Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), HCM Development Commercial Joint Stock Bank (HDBank), Asia Commercial Joint Stock Bank (ACB), Tien Phong Commercial Joint Stock Bank (TPBank), Kien Long Commercial Joint Stock Bank (Kienlongbank), Military Commercial Joint Stock Bank (MBB), Vietnam Prosperity Commercial Joint Stock Bank (VPBank), Vietnam International Commercial Joint Stock Bank (VIB), Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), Orient Commercial Joint Stock Bank (OCB), and Bac A Commercial Joint Stock Bank (BacABank).
Five remaining banks including Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank), Saigon Hanoi Commercial Joint Stock Bank (SHB) and Viet A Commercial Joint Stock Bank (VietABank) did not announce their ratio of using short-term capital for medium and long-term lending. An Binh Commercial Joint Stock Bank (ABBank), in an interview with reporter on the sidelines of its 2019 annual general meeting, said that the bank’s ratio of short-term funds used for medium and long-term lending is within the allowed level.
Among the 14 banks which announced this ratio, most of them posted it above 30%. BacABank posted the highest ratio with 39.6%, followed by OCB (37.6%), Sacombank (37.4%), etc. NamABank and SCB are having fairly low ratio of using short-term funds for medium and long-term lending, reaching respectively 16.7 percent and 20.4%. In addition, this ratio is about 30 percent at Techcombank, and 32 percent at HDBank.
Most banks have plans to increase charter capital in 2019, seek funding from international organisation on a long-term with low costs, or issue long-term Certificates of Deposits in order to increase the medium and long-term fund, minimising the pressure in gradually reducing the ratio of short-term funds used for medium and long-term loans in the future.
In the past 20 years, the State Bank of Vietnam (SBV) has adjusted the regulation on the ratio of short-term funds used for medium and long-term lending, including a period from October 2010 to January 2015 when this ratio was left “open” in Circular 13/2010/NHNN. After that, the SBV issued Circular 36/2014/NHNN again limited this ratio at 60%, then 45 percent and 40 percent from January 1st 2019.
In the past, this ratio of the entire banking system bottomed in April 2012 at 7.58 percent and peaked at 34.6%. It reached about 28.42 percent in February 2019.
