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Tuesday, June 25, 2024

SBV weighs rule on special loans for bank runs

By Nguyen Tan

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HCMC – The State Bank of Vietnam (SBV), the central bank, is currently reviewing a regulation on special loans for commercial banks experiencing massive cash withdrawals.

This regulation is outlined in a draft circular on special loans, which is being circulated to gather feedback.

Such special loans will be sourced from the central bank’s funds designated for fulfilling payment obligations towards depositors in credit institutions struggling with bank runs.

According to the draft circular, the SBV will determine the loan amounts based on the repayment capacity of the financial institutions requesting special loans, and the loan duration will not exceed 12 months.

These special loans will come with favorable lending rates, equivalent to the loan refinancing rates guaranteed by valuable documentation, including Government bonds and the SBV’s short-term bonds.

Moreover, commercial banks under special control may also receive special loans to facilitate approved compulsory transfers.

Borrowers will only be permitted to utilize special loans to make payments in Vietnamese currency for individual depositors at the borrowers. Other payment obligations of the credit institutions will be subject to the discretion of the SBV governor.

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