Central bank halts controversial terms restricting loans

The State Bank of Vietnam (SBV) has indefinitely withdrawn three terms from Circular 06/2023 which were deemed controversial because they further restricted access to loans.

In an announcement on Wednesday evening, the SBV said the three negated terms were clauses 8, 9, 10 of Article 8, Circular 39/2016, which also featured and were adjusted in Circular 06/2023. All three clauses prohibit loans in certain cases.

The central bank made the move a few hours after Prime Minister Pham Minh Chinh asked the central bank to carefully consider opinions related to Circular 06, which were given by associations, businesses and banks with the goal of removing unsuitable clauses, reducing red tape, and clarifying vague terms.

Clause 8 mentioned loans intended to be used for capital contributions, purchases, and transfer of capital contributions by limited liability companies or partnerships; capital contributions, purchases, and transfer of capital contributions in joint stock companies that have not been listed on the stock market or not yet registered for trading on the unlisted public company market (UPCoM).

Clause 9 stipulated loans for paying capital contributions per capital contribution contracts, joint investment contracts, and business cooperation contracts for the implementation of investment projects which were not eligible for business operations per the legal framework at the time of the loans.

Clause 10 covered loans to pay financial compensation unless the loans meet certain conditions. First, customers have already used their own capital to pay for the cost of implementing business projects, and those costs were incurred in less than 12 months prior to the loans. And second, expenses paid by customers using their own capital are sourced from loans which were submitted to credit institutions as medium- and long-terms loans to carry out the projects

The central bank said it would cooperate with relevant agencies to research and set out suitable solutions to control risks, ensure the safe operation of credit institutions, and lift issues for businesses and the public.

Circular 06/2023 attracted negative responses from businesses, experts, and business associations.

The Ho Chi Minh City Real Estate Association (HoREA) pointed out Circular 06 raised the number of loan restriction from six to 10, further preventing credit access for homebuyers, realty businesses, and realty investors.

Dr. Le Xuan Nghia, a member of the National Financial-Monetary Policy Advisory Council, said some rules in Circular 06/2023 “did not meet international practices”.

On August 17, Deputy Prime Minister Le Minh Khai chaired a conference to review Circular 06. Representatives of businesses and business associations noted the circular does not set stricter terms for loans, but there are vague terms which may hurt realty businesses in investment, buying-selling, capital contributions, and restructuring. Some examples included “investment projects not meeting conditions for business operations”, “financial compensation”, and others.