The State Bank of Vietnam (SBV) said credit growth in 2020 would maintain at about 14%. Currently, many commercial banks were waiting for the SBV to grant the loan limit in 2020.
Priority when meeting Basel II standards
Recently, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) had met the requirement of minimum capital adequacy ratio (CAR) along with a series of Basel II standards, recognised by SBV to meet the provisions of Circular 41/2017/TT-NHNN since December 1, 2019. Thus, BIDV was the 18th bank approved to meet Basel II standards.
The remaining banks that had been recognised to meet Basel II standards included Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), Military Commercial Joint Stock Bank (MB), Asia Commercial Joint Stock Bank (ACB), Vietnam International Commercial Joint Stock Bank (VIB), Vietnam Maritime JointStock Commercial Bank (MSB), Vietnam Prosperity Joint-Stock Commercial Bank (VPBank), HCM City Development Joint Stock Commercial Bank (HDBank), Orient Commercial Joint Stock Bank (OCB), Tien Phong Commercial Joint Stock Bank (TPBank), Viet Capital Commercial Joint Stock Bank (Viet Capital Bank), Vietnam Thuong Tin Commercial Joint Stock Bank (Vietbank), Southeast Asia Commercial Joint Stock Bank (SeABank) and ShinhanBank Vietnam Limited (ShinhanBank), Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank), Nam A Commercial Joint Stock Bank (Nam A Bank), Standard Chartered Vietnam Limited.
However, there were still two big banks, Vietnam Bank for Agriculture and Rural Development (Agribank) and Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), which were still out of the race and not ready to apply Basel II.
In a recent meeting, SBV affirmed that credit growth in 2020 would remain at around 14%. Accordingly, SBV would apply a policy to consider granting credit limits to each bank. Those that met Basel II standards would be granted a higher credit limit. Besides, banks participating in specific projects of the government, SBV, the Ministry of Finance, etc., such as rural development, shadow banking restriction, and so on, were expected to be given priority in the lending threshold.
Can Van Luc, a financial and banking expert, said that the reason banks that met Basel II standards were considered for higher credit limits was that these banks themselves had managed risk well and been transparent in financial and business activities. Meanwhile, the banking group was restructuring, having high bad debt was likely to be reduced the loan limit. The remaining banks would have credit growth ranging from 10 percent to 14%.
According to statistics in 2019, SBV had just approved to increase the credit limit for Asia Commercial Joint Stock Bank (ACB) from 13 percent to 17%, VPBank from 12 percent to 16%, Techcombank from 13 percent to 17%, MB from 13 percent to 17%. Many other banks have completed Basel II standards, but so far, they had not been loosened for the credit limit.
According to the report of the BaoViet Securities Joint Stock Company (BVSC), banks tended to control credit, aiming at sustainable growth. The lending structure of the banking sector still focused mainly on agriculture and construction (9.1 percent higher), industry and construction (29.5 percent higher), trade (21.9 percent higher). These were priority areas for government lending.
There would be an additional five percent in the lending threshold.
SBV had just issued Circular 22/2019/TT-NHNN replacing Circular 36/2014/TT-NHNN stipulating limits and prudential ratios of banks, active from January 1, 2020. Some fundamental changes in Circular 22/2019/TT-NHNN were the roadmap to gradually reduce the proportion of short-term capital used for medium and long-term loans from the current 40 percent to 30 percent and the increase of the risk ratio of consumer real estate lending, from the current 50 percent to the maximum ceiling of 150%. Also, this Circular adjusted the rate of the loan to total deposits (LDR) at 85 percent with a transition period of two years (before January 1, 2022).
Therefore, according to the new regulation in Circular 22/2019/TT-NHNN, state-owned commercial banks would reduce the LDR ceiling from 90 percent to 85 percent but would not be affected much, because they had not reached the credit limit. As for joint-stock commercial banks, this would be an excellent opportunity to expand credit to the economy.
Nguyen Tri Hieu, a financial and banking expert, said that as of October 2019, the total credit capital of the whole economy was estimated at nearly 7.5 quadrillion dong. In particular, the entire credit of commercial joint-stock banks accounted for about 50%. This block would have about five percent more to reach the lending threshold, equivalent to more than 200 trillion dong injected to the economy when Circular 22/2019/TT-NHNN took effect.
