The Vietnamese central bank has told commercial banks and financial institutions to improve credit quality and go easy on loans against securities in a bid to keep inflation in check.
In a dispatch Monday the State Bank of Vietnam (SBV) told financial institutions to keep loans against securities to below 3% of total outstanding loans.
It also directed them to tighten control on consumption loans and lending for business and production, and to crack down on businesses misusing loans to but securities.
The SBV urged state-run banks to improve reporting of foreign exchange transactions to monitor foreign portfolio investment inflows into the country.
It told them to improve risk management and earmark reserves for lending against stocks.
An SBV official said banks often lent up to 50% of the value of a share pledged as collateral which was too high. Banks claim they fully evaluate the risks before lending against stocks and that the risk is manageable. An official said banks did not loan more than 50% of a stock’s market value.
Source: Thanh Nien
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