September 23, 2018 00:16

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Foreign currency credit control: It should be appropriate

20:02 | 24/11/2017

VCN- In the first 10 months of 2017, foreign currency credit has increased sharply due to many reasons. Therefore, the control of foreign currency credit should be implemented in a more reasonable manner, especially when the time that the State Bank (SBV) tightens foreign currency loans comes closer.

foreign currency credit control it should be appropriate
Foreign currency credit is rising in 10 months of 2017. Photo: ST.

Why increase?

The report on the economic and financial situation in October and the first 10 months of the year announced by the National Financial Supervisory Commission shows that, by the end of October, credit (including corporate bonds) is estimated to increase by 13.5% compared to the end of 2016. In particular, foreign currency credit rose more than the same period in 2016 with an increase of 11.5% (the same period in 2016 increase by 4.4%). This is not the first time this agency has raised the sudden growth of foreign currency credit. Earlier, the agency raised a note to management agencies about the increase in foreign currency credit in the first eight months of 2017.

The cause of the increase above is mainly due to the increase in demand, especially the peak year-end when companies need foreign currency to pay for goods, contracts for the whole 2017 and order goods for the year-end period and the beginning of 2018. In addition, in the first eight months of 2017, Vietnam is in a trade deficit, causing high demand in foreign currency. In particular, foreign currency credit is also supported a lot by the exchange rate and interest rates.

According to experts of Bao Viet Securities Joint Stock Company (BVSC), the stability of the USD/VND exchange rate since the beginning of the year has also contributed to the growth of foreign currency credit. Moreover, the changes in the central rates announced by the SBV were managed softly, helping the forecast of exchange rate fluctuations of business units become easier, which led to increasing demand for USD to serve business production, in the context of output interest rate was cheaper than before. About the interest rates, thanks to stable exchange rates, bank liquidity is plentiful so the interest rates in VND or foreign currencies are stable, even tends to fall slightly compared to the beginning of the year; the short-term interest rates of USD loans are popular at 2.8-4.7% per year.

On the other hand, foreign exchange supply has also increased in recent times, as some financial institutions are aggressively providing USD through foreign currency loans to commercial banks as IFC says it is considering to provide $US 200 million to Vietnam International Bank (VIB) in the form of five-year loans. Previously, VPBank and IFC also had initial agreements on $US 57 million of the convertible loan with a maturity of five years.

Therefore, in mid-September, the governor of the SBV had to request the credit institutions and branches of foreign banks to implement the regulations on mobilizing capital in foreign currencies. Accordingly, the Governor of the SBV required strict control of the credit growth rate in foreign currencies, and at the same time control the credit/capital mobilization ratio in foreign currency at an appropriate level, ensuring the balance of capital between mobilizing and lending, strengthening risk control in credit activities in foreign currency; Not apply technical measures to skirt or exceed the interest rate ceiling; prohibit unfair competition in raising capital.

Conditional reduction

The good news is that after 8 months of trade deficit, in the 9th month, Vietnam has returned to export surplus. According to statistics of the General Department of Customs, accumulated 10 months of 2017, the total import and export value of Vietnam reached $US 346.54 billion, increased by 21.5% compared to the same period in 2016. In which, the total export value reached $US 174.55 billion, rose by 21.3% and the total import value reached $US 171.99 billion, increased by 21.6%; The trade balance of goods in the whole country reached trade surplus of $US 2.56 billion. With such growth rate, it is almost certain that in 2017, it will get a new record when our country reaches and exceed $US 400 billion of import-export turnover for the first time. The trade surplus is an important factor contributing to Vietnam's supply of foreign currencies, helping enterprises to reduce the "thirst" of foreign currency in the coming time.

In addition, the most notable point is that lending in foreign currencies will be tightened as the Circular No. 31/2016/NHNN amending and supplementing a number of articles of Circular No. 24/2015 / NHNN on lending regulations expires on December 31, 2017. If it is not extended for many reasons as before, from the beginning of 2018, the mobilization and lending activities of foreign currencies in the banking system will be shifted to purely commercial purchases, excepting a number of specific target groups.

According to economists, the SBV has now been able to fully ban foreign currency lending, especially when the SBV has bought foreign currency reserves at a record of $US 45 billion. Thus, by the end of this year, the termination of lending foreign currency should be implemented drastically, which cannot last as long as over the past seven years to avoid affecting the prestige of a national bank. Moreover, the State Bank carries out the termination of lending foreign currency to prevent the group borrowing foreign currency loans to meet the domestic capital requirements to implement the plan of production and trading of export goods which only borrow in foreign currencies then sell to get money in VND to enjoy the high interest rate difference, because in reality they need money in VND rather than foreign currency.

It can be seen that stopping foreign currency loans will help reduce the foreign currency credit exposure in the credit structure, but this may make it difficult for commercial banks and businesses who need foreign currency for trading. Therefore, enterprises recommended the SBV should have specific and suitable foreign currency lending policies for each type of enterprise, rather than banning because there will have businesses with legitimate demands. Moreover, if the enterprises focus on borrowing money in VND, the goal of anti-dollarization is guaranteed but it may push up the demand for VND, which will increase interest rates.

By Hương Dịu/Kiều Oanh