Rule on banks using maximum 30% of short-term funds for long-term loans should be scrapped: property association

A regulation that limits credit institutions to using a maximum of 30% of short-term funds for medium and long-term loans, effective from October 1, 2023, should not be applied at present, said the Ho Chi Minh City Real Estate Association (HoREA).

The regulation is part of Circular 08 issued by the State Bank of Vietnam (SBV) on June 30, 2020.

The association proposed the SBV consider amending and supplementing Circular 08, delaying the application of this regulation by 12 months to October 1, 2024.

To gradually limit credit going into potentially risky areas such as securities and real estate, the SBV has set a roadmap to reduce the ratio of short-term funds for medium and long-term loans. Specifically, the rate was reduced from 60% on February 1, 2015 to 45% on January 1, 2018, 40% on January 1, 2020, 37% on October 1, 2020, and 34% on October 1, 2021.

Bringing the ratio to 30% from October 1, 2023 is the final stage of the SBV’s roadmap, the central bank said.

HoREA explained that the current context of Vietnam’s economy is very different from when Circular 08 was issued in 2020. At that time, Covid-19 had started to take hold across the world, and although Vietnam managed to control the pandemic, it seriously impacted the economy, including the real estate sector.

After Vietnam reopened its economy, the Russia-Ukraine conflict broke out, leading to recession, high inflation, and global supply chain disruptions, it said.

“Commercial banks only need to ease lending conditions a bit to facilitate businesses’ credit access to fund investment projects that ensure feasibility or show collateral (land use rights certificates or red books),” according to the HoREA.

Businesses must accept the market value of their "red books" determined by commercial banks. This will help them to overcome difficulties and contribute to the fulfillment of the 2023 credit growth target of about 14%, it said.

The association cited the central bank's data as showing that in the year to September 15, credit reached nearly VND12,600 trillion ($518.4 billion), an increase of only 5.56% compared to the end of 2022. That means nearly VND1,000 trillion ($41.14 billion) can be pumped into the economy between now and the year-end.

“The regulation postponement will create conditions for credit institutions to appropriately use short-term capital for medium and long-term loans and improve businesses’ and people’s credit access, without causing risks to the credit system,” said the HoREA.

This is also consistent with the government's policy of promoting the safe, healthy and sustainable development of the real estate market, it added.