The State Bank of Vietnam (SBV) will continue to allocate credit growthrates for commercial banks this year, based on the banks' health andbusiness performance.
The move is aimed at controlling credit quality and restricting the generation of new non-performing loans (NPLs).
SBVDeputy Governor Nguyen Thi Hong announced the policy late last week,saying that the quota allocation for this year will be announced soon.
Theallocation is aimed at not only ensuring that credit growth serves theeconomy, but also to control credit quality and restrict new NPLsarising in the future, Hong said.
SBV will divide commercialbanks into four groups, depending upon their performance in the previousyears to allocate the credit growth quota. The division will be: Group 1(healthy banks), Group 2 (average banks), Group 3 (below-average banks)and Group 4 (weak banks). Group 4 might not be allocated credit growthrates.
Hong pointed out that to boost lending safely, the centralbank's Credit Information Centre is also building a system to monitorthe credit history of borrowers so that commercial banks can base theiractions on the information, and thereby step up lending to good firms,while ramping up scrutiny of the ailing firms.
The central bankwill also streamline a model for risk governance, inspection andsupervision, especially in a number of industries and sectors, to ensurethat banking performance remains under control, Hong stated.
SBVGovernor Nguyen Van Binh said the central bank this year is targeting acredit growth of 15 percent to limit lending and forecast that creditdemand this year will be higher than last year. The central bank in 2014targeted credit growth of 12 to 14 percent to boost lending as lastyear's credit demand was too low.
Lending this year should berestrained at only 15 percent to ensure the safety of the bankingsystem, Binh said, adding that commercial banks in 2015 must pay dueattention to credit quality, rather than credit growth as in 2014.
Somebanks have also announced credit targets for this year. However, theymight be adjusted by the middle of this year according to the centralbank's credit quota allocation, as well as market demand. BothVietcombank and BIDV targets credit growth of 16 percent this year,while the figures for Vietinbank, Military Bank are 13 to 15 percent,and 15 to 17 percent.
The central bank decided to apply thecredit quota allocation policy in 2012 when many banks accelerated theirlending by up to 50 percent, causing a sharp rise in NPLs.
Todate, some experts have recommended that the central bank withdraw thepolicy, saying that it is not necessary as the monetary market isstable. However, industry insiders have remained guarded about theirview on the withdrawal.
Head of the Business DevelopmentInstitute Dr Le Xuan Nghia told Thoi bao ngan hang (Banking Times)newspaper that the monetary market has only recently gained normalcyafter many years of volatility. The central bank should thereforeconsider lifting the policy as the banking industry has good liquidity,while the Government is applying strict measures for handling NPLs andcross-ownership at banks.
The Deputy Director of the CentralInstitute for Economic Management Vo Tri Thanh also suggested theremoval, saying banks are currently being cautious about lendingthemselves, as they are well aware of the consequences, includinggenerating a large number of NPLs that they will be burdened due torapid credit growth.
Besides, Thanh said, the central bank shouldnot continuously use administrative measures to intervene in themonetary market, but allow it to operate under the market mechanism.
However, industry insiders recommended that the central bank scrutinise the withdrawal.
DeputyDirector of HD Bank, Le Thanh Trung, said that in theory, the centralbank should reduce its administrative intervention and allow themonetary market to operate under a market mechanism. However, in thecurrent context, a withdrawal of the policy too early might not be good,and might even lead to negative consequences.
Though the economyhas become better, it will take more time to see whether the economy isreally healthy and is able to run smoothly, Trung said, adding thattherefore, the central bank's role in leading the market and guiding thepolicy is very important.
Trung added that the time for policywithdrawal will depend much on the progress of the economy, suggestingthat there should be no adjustment made at least during the first halfof 2015.
Echoing Trung, deputy director of Orient Commercial BankNguyen Dinh Tung, also said the improvement of the banking industry andthe entire economy as well, are not really sustainable so beingcautious is necessary.
Tung said the central bank is required tocontrol credit growth for the past years so that it does not withdrawthe policy, unless it feels really secure about the stability of theentire banking system.-VNA
The move is aimed at controlling credit quality and restricting the generation of new non-performing loans (NPLs).
SBVDeputy Governor Nguyen Thi Hong announced the policy late last week,saying that the quota allocation for this year will be announced soon.
Theallocation is aimed at not only ensuring that credit growth serves theeconomy, but also to control credit quality and restrict new NPLsarising in the future, Hong said.
SBV will divide commercialbanks into four groups, depending upon their performance in the previousyears to allocate the credit growth quota. The division will be: Group 1(healthy banks), Group 2 (average banks), Group 3 (below-average banks)and Group 4 (weak banks). Group 4 might not be allocated credit growthrates.
Hong pointed out that to boost lending safely, the centralbank's Credit Information Centre is also building a system to monitorthe credit history of borrowers so that commercial banks can base theiractions on the information, and thereby step up lending to good firms,while ramping up scrutiny of the ailing firms.
The central bankwill also streamline a model for risk governance, inspection andsupervision, especially in a number of industries and sectors, to ensurethat banking performance remains under control, Hong stated.
SBVGovernor Nguyen Van Binh said the central bank this year is targeting acredit growth of 15 percent to limit lending and forecast that creditdemand this year will be higher than last year. The central bank in 2014targeted credit growth of 12 to 14 percent to boost lending as lastyear's credit demand was too low.
Lending this year should berestrained at only 15 percent to ensure the safety of the bankingsystem, Binh said, adding that commercial banks in 2015 must pay dueattention to credit quality, rather than credit growth as in 2014.
Somebanks have also announced credit targets for this year. However, theymight be adjusted by the middle of this year according to the centralbank's credit quota allocation, as well as market demand. BothVietcombank and BIDV targets credit growth of 16 percent this year,while the figures for Vietinbank, Military Bank are 13 to 15 percent,and 15 to 17 percent.
The central bank decided to apply thecredit quota allocation policy in 2012 when many banks accelerated theirlending by up to 50 percent, causing a sharp rise in NPLs.
Todate, some experts have recommended that the central bank withdraw thepolicy, saying that it is not necessary as the monetary market isstable. However, industry insiders have remained guarded about theirview on the withdrawal.
Head of the Business DevelopmentInstitute Dr Le Xuan Nghia told Thoi bao ngan hang (Banking Times)newspaper that the monetary market has only recently gained normalcyafter many years of volatility. The central bank should thereforeconsider lifting the policy as the banking industry has good liquidity,while the Government is applying strict measures for handling NPLs andcross-ownership at banks.
The Deputy Director of the CentralInstitute for Economic Management Vo Tri Thanh also suggested theremoval, saying banks are currently being cautious about lendingthemselves, as they are well aware of the consequences, includinggenerating a large number of NPLs that they will be burdened due torapid credit growth.
Besides, Thanh said, the central bank shouldnot continuously use administrative measures to intervene in themonetary market, but allow it to operate under the market mechanism.
However, industry insiders recommended that the central bank scrutinise the withdrawal.
DeputyDirector of HD Bank, Le Thanh Trung, said that in theory, the centralbank should reduce its administrative intervention and allow themonetary market to operate under a market mechanism. However, in thecurrent context, a withdrawal of the policy too early might not be good,and might even lead to negative consequences.
Though the economyhas become better, it will take more time to see whether the economy isreally healthy and is able to run smoothly, Trung said, adding thattherefore, the central bank's role in leading the market and guiding thepolicy is very important.
Trung added that the time for policywithdrawal will depend much on the progress of the economy, suggestingthat there should be no adjustment made at least during the first halfof 2015.
Echoing Trung, deputy director of Orient Commercial BankNguyen Dinh Tung, also said the improvement of the banking industry andthe entire economy as well, are not really sustainable so beingcautious is necessary.
Tung said the central bank is required tocontrol credit growth for the past years so that it does not withdrawthe policy, unless it feels really secure about the stability of theentire banking system.-VNA
