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Friday, July 26, 2024

Ratio of short-term capital for long-term loans to fall to 30%

By Nguyen

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HCMC – Vietnamese banks and foreign bank branches in Vietnam must lower the ratio of short-term capital used to make medium- and long-term loans to 30% from the current 34%, with effect from October 1, according to the State Bank of Vietnam (SBV).

The change is in line with the central bank’s Circular 08/2020, which amends and supplements Circular 22/2019.

Data from the SBV showed that 88% of capital at banks comes from deposits with tenors of less than 12 months. Meanwhile, 52% of the banking system’s outstanding loans are mid- and long-term loans.

Experts view the change as necessary for ensuring liquidity and stabilizing the banking system, as the implementation of the new regulation aims to prevent liquidity risks, stabilize banking operations and drive sustainable economic growth, according to the Vietnam News Agency.

As of July 2023, most banks complied with the existing 34% cap. State-run commercial banks came with a 24.97% ratio, joint-stock commercial banks 33.66%, and the systemwide ratio 26.14%.

The SBV had initially capped the ratio at 40% until September 30, 2021. This was followed by a 37% cap in effect from October 1, 2021, to September 30, 2022, and a 34% cap from October 1, 2022, to September 30, 2023.

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