Bank loans

State Bank of Vietnam announces changes to bank lending circular

VIETNAM, July 4 –

HÀ NỘI — The State Bank of Việt Nam (SBV) has drawn up a draft amendment to circular 39 on bank loans, in order to control credit risks.

The draft prohibits bank lending to borrowers who use the loans to secure future transactions that did not qualify at the time of the loans.

The ban is expected to prevent the use of bank loans to purchase future real estate, which has not been given carte blanche by authorities due to a lack of building permits and proof of land use rights.

The HCM City Real Estate Association (HoREA) believes that law-abiding real estate companies will not be affected by the ban, as bank loans are still available to borrowers who seek qualified real estate properties offered by the companies.

“Unqualified real estate properties include illegitimate land and apartment buildings whose foundations are not yet completed under the Real Estate Affairs Act 2014. The project is expected to protect investors from illegal practices, thereby improving the real estate market,” added the HoREA.

The association suggests that credit institutions should be allowed to make loans to help borrowers demonstrate their financial capacity, provided borrowers can provide collateral for the loans.

It also suggests that collateral-backed loans are available for borrowers who want to use the money to provide capital or invest in other businesses.

“Loan control should only be imposed on borrowers who use bank loans to engage in prohibited activities and conditional business activities, or to pay off debts and hide bad debts,” HoREA said.

Regarding business activities that are only eligible for restricted bank lending, the association urges SBV to raise the bar for borrowers involved in such activities to further reduce credit risk.

Specifically, SBV is recommended to set caps on borrowers’ loan-related ratios, including loan-to-collateral ratio and loan-to-total debt ratio, to control their lending. —VNS