A view of an MB office in Hanoi. MB could be allowed to expand its credit room to about 25 per cent in 2022. (Photo: VNA) According to the Bao Viet Securities Company (BVSC), the SBV is expected toannounce a credit expansion for commercial banks at the end of Q3 2022 or atthe beginning of Q4 2022 as most banks have so far used up most of theirassigned credit quota.
However, as the SBV has so far decided to keep the credit growth targetunchanged at 14% in 2022, the selection of banks to get a higher credit growthquota in the remaining months of this year will be tightened.
According to the SBV’s rules, the granting of credit growth quota willbe based on the asset quality and operation scale of each bankaccording to Circular 52/2018/TT-NHNN. Specifically, the SBV will rank banksaccording to six criteria, including capital, asset quality, governance,business performance results, liquidity and sensitivity to market risks.
The SBV will also consider a number of other criteria related to the banks’implementation in meeting policies and orientations of the Government and theSBV, such as reducing lending interest rates to support firms and people,focusing loans on business and production, and participating in supporting thehandling of weak banks.
According to the criteria, MB, Vietcombank, VietinBank, BIDV and Agribank areforecast to get higher credit expansion than others in the next quotaallocation as the banks were the strongest supporters of theeconomy during the COVID-19 pandemic.
In addition, MB and Vietcombank are also participating in restructuring weakbanks in the form of mandatory transfer. Therefore, the two banks will gethigher credit growth quota not only in H2 2022, but also in the followingyears.
MB has been implementing a plan to receive a mandatory transfer of OceanBank.The bank’s vice chairman Luu Trung Thai said the cooperation with OceanBank isboth a political task and an opportunity for MB to expand its operationalscale. MB will coordinate with OceanBank to check their data system beforedeveloping a plan to submit to the Government.
Meanwhile, Vietcombank is also working on a mandatory transfer ofConstruction Bank (CB).
Meeting the SBV’s criteria, BVSC estimates Vietcombank can be allowed to expandits credit room to about 19% in 2022, while the number for MB will be about 25%.
Besides the above banks, VPBank can also get a higher credit quota as thebank has considered a plan to receive a mandatory transfer of a weak bank.
After a period of overheating growth which caused interest rates and inflationto accelerate in Vietnam, the SBV decided to grant an annual credit growthquota for each bank to control the credit growth ceiling in 2011. Currently,very few countries in the world still use a credit growth granting tool likeVietnam.
According to experts, removing the credit growth limit isnecessary, but not immediately, and should be placed on a roadmap. Forinstance, the SBV announces within five years it will remove the credit limit.During these five years, the SBV will tell commercial banks how to do a stress testand solve the bank's weaknesses, and deal with weak banks as well, withregulations on checking data and responsibilities. If there is no specificschedule set, no bank will do it.
Instead of controlling the credit growth ceiling, the SBV should control creditgrowth through capital standards according to Basel, combined with modernbanking management tools such as periodic checks. This still creates a creditlimit for banks, but on a more quantitative, objective and transparent basis.
Dr Can Van Luc, member of the National Financial and Monetary Policy AdvisoryCouncil, told Viet Nam News thatthe SBV should remove the mechanism of granting credit room and managing creditgrowth through the capital adequacy ratio of banks.
“This credit limit granting mechanism should only be a temporary solution forthe next one or two years,” Luc said.
According to the latest data released by the SBV, credit growth of the entirebanking system as of July 26 reached 9.42%. With a credit growth target of 14%in 2022, credit can increase by nearly 4.6% in the last five months of thisyear, equivalent to about 478 trillion VND./.
VNA
