VIETNAM, June 27 –
A new apartment complex in District 4, HCM City. Photo VNA/VNS
HÀ NỘI — The State Bank of Vietnam (SBV) is considering stricter lending regulations, especially to fund property and equity purchases, according to inside sources.
Banking regulators have sounded the alarm over a large amount of personal loans being used to finance properties and stock purchases, posing a serious risk to the country’s financial system in the event of a market upheaval.
In order to stabilize the system and reduce risks, the SBV needs to introduce a number of regulations to tighten the whole process, from determining eligibility, conditions, use of funds and repayment plans.
Personal loans for financing property and stock purchases and other large loans will also come under greater scrutiny.
It was believed that the SBV should prohibit or limit the ability of commercial banks and financial institutes to make capital contribution loans or loans to cover future contracts or assets that did not meet legal requirements.
With regard to capital injection loans, the SBV considers that the repayment capacity of borrowers is difficult to determine and, sometimes, is not correlated with the performance of the company. The SBV cited a number of cases in which borrowers did not demonstrate that they possessed the managerial or technical capacity to help run the businesses, did not purchase the necessary machinery and equipment, or did not have the financial capacity to effectively implement business plans.
In addition, commercial banks and financial institutes have had difficulties in the past in monitoring how their loans were used after disbursement. On several occasions, they lost track of how the money was used and failed to keep track of the financial health of borrowers and their ability to repay loans.
The SBV also considered loans intended to finance the deposits needed to purchase properties to be inherently risky, as the assets generally do not materialize when the deposits are required. However, not all housing projects can get the green light to go ahead or their land use rights formalized by local authorities. VNS