The State Bank of Vietnam has raised caps on credit growth for some commercial banks. (Photo: VietnamPlus)Hanoi, (VNA) – The State Bank of Vietnam has raised caps on credit growth for some commercial banks so far this year, helping businesses obtain easier access to capital as they are putting forth post-pandemic recovery.
As of September 16, credit grew 10.47% against the end of 2021 and 17.19% against the same period last year.
The majority of the credit was poured into business and production and priority areas in an effort to revive the economy hard hit by the COVID-19 pandemic.
The SBV aims to maintain credit growth at around 14% to support the economic recovery but it will not lower guard against inflationary risks.
Tha Bank has so far decided to keep the credit growth target unchanged at 14% in 2022, the selection of banks to get a higher credit growth quota in the remaining months of this year will be tightened.
According to the SBV’s rules, the granting of credit growth quota will be based on the asset quality and operation scale of each bank according to Circular 52/2018/TT-NHNN. Specifically, the SBV will rank banks according to five criteria, including capital and asset quality, governance, business performance results, liquidity and sensitivity to market risks.
The SBV considered a number of other criteria related to the banks’ implementation in meeting policies and orientations of the Government and the SBV, such as reducing lending interest rates to support firms and people, focusing loans on business and production, and participating in supporting the handling of weak banks.
According to the criteria, MB, Vietcombank, VietinBank, BIDV and Agribank got higher credit expansion than others in the next quota allocation as the banks were the strongest supporters of the economy during the COVID-19 pandemic.
MB is among the commercial banks that get higher credit expansion than others. (Source: topbank)
In addition, MB and Vietcombank are also participating in restructuring weak banks in the form of mandatory transfer. Therefore, the two banks will get higher credit growth quota not only in H2 2022, but also in the following years.
MB has been implementing a plan to receive a mandatory transfer of OceanBank. The bank’s vice chairman Luu Trung Thai said the cooperation with OceanBank is both a political task and an opportunity for MB to expand its operational scale. MB will coordinate with OceanBank to check their data system before developing a plan to submit to the Government.
Meanwhile, Vietcombank is also working on a mandatory transfer of Construction Bank (CB).
Meeting the SBV’s criteria, BVSC estimates Vietcombank can be allowed to expand its credit room to about 19% in 2022, while the number for MB will be about 25%.
Besides the above banks, VPBank can also get a higher credit quota as the bank has considered a plan to receive a mandatory transfer of a weak bank.
After a period of overheating growth which caused interest rates and inflation to accelerate in Vietnam, the SBV decided to grant an annual credit growth quota for each bank to control the credit growth ceiling in 2011. Currently, very few countries in the world still use a credit growth granting tool like Vietnam.
According to experts, removing the credit growth limit is necessary, but not immediately, and should be placed on a roadmap. For instance, the SBV announces within five years it will remove the credit limit. During these five years, the SBV will tell commercial banks how to do a stress test and solve the bank's weaknesses, and deal with weak banks as well, with regulations on checking data and responsibilities. If there is no specific schedule set, no bank will do it.
Instead of controlling the credit growth ceiling, the SBV should control credit growth through capital standards according to Basel, combined with modern banking management tools such as periodic checks. This still creates a credit limit for banks, but on a more quantitative, objective and transparent basis.
Dr Can Van Luc, member of the National Financial and Monetary Policy Advisory Council, said that the SBV should remove the mechanism of granting credit room and managing credit growth through the capital adequacy ratio of banks.
“This credit limit granting mechanism should only be a temporary solution for the next one or two years,” Luc said.
The State Bank should be flexible in regard to credit growth limit, he said, explaining demand for capital has been on the rise as businesses are ramping up post-pandemic production activities.
“Credit restrictions due to grave concern about inflation rate will slow down recovery”, he said.
Meanwhile, Dr Le Xuan Nghia, member of the the National Financial and Monetary Policy Advisory Council highlighted the important role of the sound monetary policies from the outset of the year, saying they helped curb the inflation rate under 4% and realise the GDP growth target of 7.4%.
However, he said the State Bank should raise credit growth for the whole year to 15-16% to back post-pandemic recovery./.
