Vietnam’s central bank to take strong action against “backyard” lending

By Dinh Vu, Huong Dung
Fri, March 17, 2023 | 7:02 am GMT+7

The State Bank of Vietnam (SBV) plans to strongly reduce the maximum loan-to-equity ratio for a single customer or group of customers related to banks, as well as the maximum ownership ratio of individuals and related persons at banks.

The SBV is collecting opinions on the above-mentioned points for its draft amended Law on Credit Institutions with an aim to further rein in cross-ownership and abuse of power in granting loans.

Regarding credit limit, the draft stipulates that the total outstanding credit for a customer must not exceed 10% of the bank's equity, down 5 percentage points from the current 15%.

Similarly, total outstanding credit for a customer and related persons must not exceed 15% of the bank's equity, lower than the current 25%.

The State Bank of Vietnam plans to  reduce the maximum ownership ratio of bank shareholders. Photo by The Investor/Trong Hieu.

The State Bank of Vietnam plans to reduce the maximum ownership ratio of bank shareholders. Photo by The Investor/Trong Hieu.

Under the draft, those to whom banks are not allowed to grant unsecured loans or credit with preferential conditions include the chairman and members of the board of directors; the head and members of the supervisory board; the director, deputy directors and equivalent titles of people's credit funds. In the current regulation, the restriction only applies to chief accountants.

In addition, auditing organizations, auditors who are auditing at the bank; inspectors who are inspecting the bank; major and founding shareholders; people who appraise and approve bank credit; the bank's subsidiaries and affiliates etc. are all subject to credit restrictions.

While tightening the maximum lending rate for related people and organizations, the SBV also plans to lower the ownership ratio of individual and institutional shareholders at banks.

An individual shareholder will not be allowed to own more than 3% of the bank's charter capital, lower than the 5% stated in the current regulation. Similarly, an institutional shareholder can own no more than 10% of the bank's charter capital, except for some cases, also lower than the current 15%.

Instead of allowing shareholders and related persons to own up to 20% of the bank's capital, the central bank proposed to cut this ratio to 15%. Major shareholders of a bank and related persons are not allowed to own more than 5% of another bank.

According to the SBV, over 12 years of implementation, the Law on Credit Institutions has created a legal framework for the operation, management, inspection and supervision of credit institutions to ensure system safety and stability.

However, in the process of restructuring credit institutions, along with the development and drastic changes derived from the fourth Industrial Revolution, the Law on Credit Institutions has revealed a number of limitations, requiring adjustments to suit actual operation of credit institutions and management practices of state agencies.

Comments (0)
  • Read More
Former National Assembly General Secretary faces disciplinary action

Former National Assembly General Secretary faces disciplinary action

The Party Central Committee’s Inspection Commission (CIC) has proposed competent authorities consider and take disciplinary action against Bui Van Cuong, who stepped down last week as the National Assembly’s General Secretary.

Politics - Tue, October 29, 2024 | 11:10 pm GMT+7

Indonesia aims to become Southeast Asia's EV production hub

Indonesia aims to become Southeast Asia's EV production hub

Indonesia is actively seeking to boost investment in a bid to establish itself as a center for electric vehicle (EV) and battery production in Southeast Asia.

Southeast Asia - Tue, October 29, 2024 | 10:38 pm GMT+7

Singapore trials autonomous vehicles on public roads for cargo transportation

Singapore trials autonomous vehicles on public roads for cargo transportation

Singapore’s FairPrice Group (FPG) recently announced that it has become the first organization in the country to receive approval from the Land Transport Authority (LTA) for the final stages of trials to use autonomous vehicles (AVs) on public roads for cargo transportation.

Southeast Asia - Tue, October 29, 2024 | 10:37 pm GMT+7

Malaysia promotes green energy transition

Malaysia promotes green energy transition

The Malaysian Government has increased the National Energy Transition Facility Fund allocation to over RM300 million ($60.80 million) in the 2025 budget from only RM100 million this year.

Southeast Asia - Tue, October 29, 2024 | 10:35 pm GMT+7

Singapore spends $270 mln on AI infrastructure, human resources

Singapore spends $270 mln on AI infrastructure, human resources

Singapore’s National Research Foundation (NRF) will allocate $270 million to the National Supercomputing Centre (NSCC) in the next three years to train specialists and develop next-gen supercomputers in order to boost AI through supercomputing talent and infrastructure.

Southeast Asia - Tue, October 29, 2024 | 10:34 pm GMT+7

Vietnam gov’t removes curbs on retail investors in private bond offerings

Vietnam gov’t removes curbs on retail investors in private bond offerings

The Vietnamese government has dropped initially drafted restrictions on retail investors of corporate bonds via private placements in a move to beef up the local stock market after recent financial scandals.

Finance - Tue, October 29, 2024 | 10:16 pm GMT+7

Germany’s PNE seeks Vietnam partners for $4.6 bln offshore wind power project

Germany’s PNE seeks Vietnam partners for $4.6 bln offshore wind power project

Germany-based wind energy developer PNE AG is seeking “sustainable partners” in Vietnam to deploy the $4.6 billion Hon Trau offshore wind power project in the central coastal province of Binh Dinh.

Energy - Tue, October 29, 2024 | 6:55 pm GMT+7

E-wallet turned financial assistant MoMo banks on ‘power of small things’: exec

E-wallet turned financial assistant MoMo banks on ‘power of small things’: exec

MoMo e-wallet believes in the power of small things, Vietnamese ingenuity, technological advancement, and positive change, says Nguyen Manh Tuong, co-founder, vice chairman of the board, and CEO of MoMo.

Companies - Tue, October 29, 2024 | 6:29 pm GMT+7

Keppel subsidiary M1 buys 70% stake in Vietnamese IT firm ADG for $29 mln

Keppel subsidiary M1 buys 70% stake in Vietnamese IT firm ADG for $29 mln

M1 Limited (M1), a telecommunications firm under Singaporean conglomerate Keppel, will acquire a 70% stake in Vietnam-based information technology (IT) solutions provider ADG for SGD37.8 million ($28.5 million).

Companies - Tue, October 29, 2024 | 4:27 pm GMT+7

Vietnam’s Masan MEATLife posts $4.14 million in Q3 after-tax profit

Vietnam’s Masan MEATLife posts $4.14 million in Q3 after-tax profit

Masan MEATLife (MML), a subsidiary of Vietnamese consumer retail giant Masan Group, recorded net profit after tax and pre-minority interest (NPAT Pre-MI) of VND105 billion ($4.14 million) in the third quarter of 2024.

Companies - Tue, October 29, 2024 | 3:25 pm GMT+7

Vietnam’s PV Gas, Russia’s Zarubezhneft to further core area cooperation

Vietnam’s PV Gas, Russia’s Zarubezhneft to further core area cooperation

PV Gas, under state-owned Petrovietnam, and Russia’s state-owned Zarubezhneft will further cooperate in oil-gas and energy activities, the former said on Monday.

Energy - Tue, October 29, 2024 | 3:05 pm GMT+7

Vietnam steel major Hoa Phat’s net profit may reach $1 bln with new mill

Vietnam steel major Hoa Phat’s net profit may reach $1 bln with new mill

Hoa Phat Group, which claims to be the biggest steel producer in Vietnam and Southeast Asia, may record a net profit of VND20-25 trillion ($793-991 million) when its new mill in the central region becomes fully operational, according to Vietcombank Securities (VCBS).

Companies - Tue, October 29, 2024 | 2:42 pm GMT+7

IFC plans $200 mln loan to LG Innotek Vietnam

IFC plans $200 mln loan to LG Innotek Vietnam

The International Finance Corporation (IFC), the private sector arm of the World Bank Group, plans to make a sustainability-linked loan (SLL) of up to $200 million to LG Innotek Vietnam Haiphong Co., Ltd.

Finance - Tue, October 29, 2024 | 10:11 am GMT+7

Vietnam banks' earnings outlook ‘relatively positive’: PYN Elite Fund

Vietnam banks' earnings outlook ‘relatively positive’: PYN Elite Fund

The Q3/2024 earnings growth of Vietnam’s listed companies will likely settle around 20-30% and banks’ earnings outlook for the next 12 months is also relatively positive, said the Finland-based PYN Elite Fund.

Finance - Tue, October 29, 2024 | 9:39 am GMT+7

Chinese e-commerce giant Temu's Vietnam entry: unfair competition or market economy norm?

Chinese e-commerce giant Temu's Vietnam entry: unfair competition or market economy norm?

Vietnam's social media is currently inundated with ads from Temu, the e-commerce platform under China’s PDD Holding, showcasing a diverse array of products – from electronic chips to refrigerator mats – at discounts of up to 90%, and raising concerns about its strategy and compliance.

Opinion - Tue, October 29, 2024 | 7:55 am GMT+7

China’s BYD to repair Apple tablets with $375 mln northern Vietnam project

China’s BYD to repair Apple tablets with $375 mln northern Vietnam project

Chinese giant BYD is set to repair Apple tablets at its factory in Vietnam’s northern province of Phu Tho.

Industries - Mon, October 28, 2024 | 10:27 pm GMT+7