The Governor of the State Bank of Vietnam has issued Decree No. 03/2007/CT-NHNN on the size and quality of credits and loans to securities investment and trading, in order to control inflation and accelerate economic growth.
According to the State Bank’s evaluation, the credit and banking operations of the national economy have been effectively expanded in the first months of 2007; the bad debt ratio has been reduced; the credit structure has been gradually adapting to the demand of the national economy; and lending for securities investment and trading has been tightened.
However, credit capital tends to be higher than the same period of previous years, and even higher than this year’s target. This has potentially adverse effects on inflation control this year and in following years. The quality of credits in several sectors and fields is not high. Lending for stock investment and trading is very risky, because the stock market is undergoing a correction. The market information collection and analysis for risk management and evaluation is untimely.
These are major reasons for the State Bank to tighten control over lending for securities investment and trading, in tune with the Prime Minister’s instruction at the conference on implementation of banking missions in 2007, and on intensification of securities operation management and supervision. In the Decree, the State Bank Governor demanded credit organisations and affiliated units to carry out measures to control the size and quality of credits and loans for securities investment and trading.
Particularly, credit organisations will continue carrying out measures raising capital to expand lending and investment to meet economic demand in 2007 and the following years; regulating the structure and terms of mobilised capital to match the structure and terms of credit, ensuring safe operation and business for credit organisations; improving the capability to collect information to recognise, measure, supervise and control credit risks and other business risks; tightening control over risks from loans for securities investment and trading as well as for real estate investment and trading, consumption lending and foreign currency lending.
To contribute to sustainable stock market development while limiting the risks of loans and valuable paper discounts for securities investment and trading, the State Bank Governor demanded credit organisations limit outstanding loans for securities investment and trading, and valuable paper discounts for securities investment and trading to less than 3 per cent of total outstanding loans.
Outstanding lending capital and valuable paper discount for securities investment and trading consist of: loans and discounts of valuable papers to securities companies; loans, by guarantee of securities and/or other assets, for securities investment and trading to other organisations and individuals; and discounts of valuable papers to organisations and individuals to invest and trade stock.
In addition, credit organizations’ discount of valuable papers to give loans for securities investment and trading, and loans by the guarantee of securities mortgage, must be carried out in accordance with the law and instructions from the State Bank. Credit organisations also have to classify debts and accumulate backup funds for risks from lending in this field.
On foreign indirect investment inflows, the State Bank said it is urgently amending and issuing new legal documents on the management of foreign exchange to tighten control over this aspect. (State Bank of Vietnam)
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