Vietnam central bank to control credit in high-risk areas

The State Bank of Vietnam (SBV) will continue implementing solutions to control credit heading into high-risk areas, including speculative real estate areas, the high-end real estate segment with excess supply, securities and corporate bonds.

In a report sent to the National Assembly, Vietnam's legislative body, the central bank said it will regularly and continuously monitor the operations of units in the banking system and make periodic macro and micro safety reports.

The SBV intends to closely supervise the growth rate of outstanding loans and the quality of credit for high-risk fields such as real estate, securities, consumption, and corporate bond investments. Based on the supervision outcome, it will issue warnings and recommendations on issues of concern.

The central bank will als continue to strengthen inspections on credit for potentially risky areas.

Finally, it plans to control the level of credit concentration in a number of large customers and customer groups, and those related to major shareholders in credit institutions, as well as cross-lending, ensuring the safety of banking activities.

The SBV will strictly inspect and control credit and the use of capital, especially huge credit going into businesses that a part of an ecosystem or "internal" businesses that pose great risks.

According to the SBV, by the end of May 2023, the entire system had 40 credit institutions investing in corporate bonds with a total balance of VND205.4 trillion ($8.44 billion), down 14.7% compared to the end of 2022. Bond investments accounted for only 1.67% of the total outstanding balance, lower than the 2% recorded at the end of 2022.

As of July 2023, credit in the securities sector made up 0.55% of the total outstanding debt of the economy, an increase of 62% from the end of 2022. Of which, investment in low-risk securities (mainly government bonds) accounted for 82.7% of the total, up 72.7%.

Meanwhile, real estate credit increased nearly 5% compared to the end of 2022, accounting for 21.73% of the country's total outstanding debt.

Vietnam's credit growth reached only 5.56% in the year to September 15, up slightly from 5.33% at the end of August, while the target set for the year is 14%.