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Wednesday, June 19, 2024

Govt weighs empowering central bank governor on special loans

The Saigon Times

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HCMC – The Government is considering authorizing the Governor of the State Bank of Vietnam (SBV) to approve zero-interest special loans.

This proposal is part of a broader discussion on legal amendments that took place during a recent Government meeting.

While there was a consensus on various aspects such as early intervention and special control measures, differences emerged regarding debt categorization, risk management, and authority over zero-interest special loans.

The latest draft proposal by the SBV suggests empowering the Prime Minister to decide on such loans during the restructuring process. However, the Government argues that this authority should be vested in the SBV’s governor, as these matters align more closely with the expertise of the central bank.

In April 2023, SBV Governor Nguyen Thi Hong submitted Document 166 to the National Assembly, which included amendments to the Law on Credit Institutions. The proposal aimed to provide support to banks facing reserve violations and non-compliance with safety assurance ratios during significant withdrawals.

Governor Hong’s proposal outlined the provision of special loans at 0% interest rates by the SBV, Deposit Insurance of Vietnam, Co-operative Bank of Vietnam, and commercial banks to assist banks in dealing with massive cash withdrawals.

The central bank would have the authority to temporarily suspend transactions at banks experiencing significant fund outflows, acting as a crucial safety mechanism for the financial sector.

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