Some commercial banks have managed to gain approval for an enlarged credit quota from the State Bank of Vietnam, whilst others failed to do so.
Illustrative photo. (Source: Internet)
Since the beginning of 2019, the State Bank of Vietnam (SBV) has launched an overall credit growth target of 14 per cent for the entire year, but many credit institutions still expect the central bank to increase this limit.
By late June, the credit growth of many banks had reached close to half that ratio, while a number of financial institutions have seen credit growth approach the entire full-year quota. Previously, commercial banks had called upon the central bank to provide them with additional credit room amid some lenders, namely MB, TPBank, OCB, Vietcombank, and VIB, completing the implementation of Basel II standards.
The central bank, following a thorough scrutiny, approved the expansion of credit quotas for a few institutions, but not all.
Techcombank in particular received approval from the central bank to extend its credit limit to 17 per cent from 13 per cent while VPBank was allowed to raise its credit quota from 12 per cent to 16 per cent. The military-run MB was permitted to lift its credit growth to 17 per cent in comparison with the previous ratio of 13 per cent.
The expansion of credit quotas became one of the priorities set by the SBV to commercial banks whose implementation of Basel II standards was completed earlier than previously planned. This also served as a positive way to encourage banks to improve the overall quality of their operations and their capital adequacy ratio.
Nguyen Quoc Hung, head of the SBV’s Credit Department, said that since early 2019 the central bank has embraced a cautious stance on realizing the credit growth target for the full year.
Given this, the expansion of credit limit has been scrutinized in order to both ensure financial safety and minimize newly arising bad debts.
Financial analysts claimed that the 14 per cent credit growth set for the banking sector during 2019 remains a realistic and achievable target.
The application of Basel II standards by commercial banks has made their credit growth gradually inch toward the allowed quota. The credit growth expansion has been calculated rigorously by the central bank in order to match the capital adequacy ratio of lenders and avoid harmful effects to the overall credit growth.