Banks saying ‘no’ to securities loans

VnnNews – Though commercial banks still have room to provide loans to fund securities investments, they are increasingly indifferent.

Commercial banks lost interest in securities loans after the State Bank of Vietnam (SBV) released a decision stipulating banks must apply the ceiling interest rate scheme in funding securities loans. This meant banks could only lend to securities investors at interest rates of no more than 10.5 percent per annum.

 

The decision aimed to restrict banks’ lending to securities investors, after central bank decided commercial banks should concentrate on loans to fund production and businesses to help recover the economy.

 

Until that point funding securities investments had been the favorite kind of bank loan, because they meant big profits thanks to high lending rates.

 

However, now banks have changed plans, because they don’t want to takes risks when there is just the low interest rate of 10.5 percent as a potential reward.

 

Director of a HCM City-based bank said that the 10.5 percent interest rate is not enough to cover expenses and risks. He said that only when central bank adjusts the basic interest rate and the stock market stabilizes, will he think of opening the doors again to securities investors.

 

Economists have pointed out that banks find it hard to mobilize capital now, therefore, securities loans, real estate and consumer credit are restricted.

 

According to Luu Trung Thai, deputy general director of Military Bank, though the bank still has room to fund securities investments (under the current regulations, the outstanding loans to fund securities investments must not be higher than 20 percent of banks’ chartered capital), the bank will have to be more selective in choosing clients.

 

Eximbank, which was the pioneer in cooperating with securities companies to expand loans several months ago, has now informed them of a halt in providing loans.

 

Similarly, the Bank for Investment and Development of Vietnam (BIDV) and Agribank have also cut capital they had reserved to provide to securities companies to support securities investors.

 

Representative from Au Viet Securities Company (AVSC) said services to lending securities investors, which had been implemented with the cooperation with Agribank and BIDV, have halted since the end of October 2009. Prior to the temporary interruption, securities investors, who opened transaction accounts at AVSC, could borrow up to several billion dong from BIDV and Agribank to make investments.

 

According to Le Xuan Nghia, deputy chairman of the National Finance Supervision Committee, the outstanding securities loans by October 2009 had reached 12 trillion dong, while the figure was 6,880 billion dong in 2008.

 

VietNamNet/DT

 

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