State bank calls for tighter curbs on dollar credit growth

HA NOI – The State Bank of Viet Nam has asked commercial banks to strictly supervise credit growth in foreign currencies, including the US dollars, in order to secure the banking system.

Banks were told to control outstanding loans at lower rates than deposits, which would in turn ensure sufficient payment capacity.

The message was sent when loans in US dollars continued to dominate overall credit growth, rising by 3.16 per cent in May, bringing dollar credit growth in the first five months to 20.23 per cent, according to the SBV.

Meanwhile, dollar deposit growth was just 0.21-0.78 per cent during the first four months, and 1.19 per cent in May.

This was blamed on the high interest rates commercial banks were charging on dong-denominated loans. Along with the enormous savings in interest costs, the stability of the dollar-dong exchange rate had also encouraged enterprises to take out loans in dollars.

The central bank also told bankers to strictly control the dollar loan tenors in order to be balanced with deposit tenors, which were designed to avoid risks in payments.

Commercial banks should also limit granting authority to branches over dollar lendings.

This regulation will minimise risks, in case branches do not comply with the security rules in foreign exchange management.

Lenders must be sure that they can call back loans for dollar loans made for export or import.

Dollar credit should be spared for prioritised imports such as petrol and gas, as well as materials and equipment for production and construction.

Source: vietnamnews