SBV: no concessions on loans for securities investments

Governor of the State Bank of Vietnam (SBV) Le Duc Thuy yesterday affirmed in an interview with the press that SBV would not change its mind on the issue relating to the limitation on securities investment loaning.

Responding to the questions about the revaluation of the dollar in recent days, Mr Thuy asserted that there would be no imbalance in foreign currency supply and demand, and that the VND/US$ exchange rate would fluctuate by 1% at maximum until the end of this year.

At the end of 2006, the VND/US$ exchange rate was low, reflecting the excess of supply over demand, which was rarely seen in previous years. This was because of higher exports (which brought more foreign currencies), and higher investment flow. This is why SBV has to buy foreign currencies: in order to prevent the local currency from further falling, said Mr Thuy.

SBV is now still buying foreign currencies, though the offered volume now is lower than that of the last five months (the central bank has bought $7bil in the last five months). More foreign currencies will continue inflowing in direct and indirect ways, or through overseas remittance. Therefore, Mr Thuy has affirmed that there would not be tightness in foreign currency supply and demand.

“Although the excess of foreign currencies will not be high the VND will still devaluate, but the local currency value decrease will still be within the control of the central bank with the expected fluctuation of 1% at maximum,” Mr Thuy said.


Do you think that SBV has imposed an “administrative order” when deciding that commercial banks’ outstanding loans given to securities investors must not exceed 3% of the banks’ total outstanding ones?

SBV decided to limit loaning for securities investments to follow the Prime Minister’s instructions on controlling the bank capital flow into the stock market.

In fact, the central bank has implemented a series of measures to limit the cash flow from banks into the stock market, but the measures showed little efficiency. Statistics showed that in the first four months of the year, the outstanding loans provided for securities investors amounted to 2.6% of total outstanding loans, and the figure saw just a little decrease by 0.1% in May 2007.

In principle, other central banks never allow commercial banks to get involved in funding securities trading. What will happen if investors, who borrow money from banks, cannot sell shares and get money back for debt payment? You may know that several hundred share items now cannot find customers on the OTC market.

The central bank checked information before making the decision. We found out that only 12 commercial banks had outstanding loans to securities investors at more than 3% of total outstanding loans. The%age is 3% for joint stock banks, while the figure is very low for state owned banks as the banks have big capital. Meanwhile, no foreign bank gets involved in this kind of loaning. As such, the ceiling of 3% should be seen as an ‘acceptable’ figure if considering the current loaning of banks.


How will the central bank deal with the banks which have the outstanding loans to securities investors higher than the allowed level?

We are planning to release a circular, guiding the implementation of the decision on limiting securities investment loaning. We will give them time, so that the banks which have the outstanding loans to securities investors higher than the allowed level can collect debts.

I have to remind you that the decision is applied only for the securities investment deals in the stock market. It will not apply to the programme on supporting staffs in equitised companies in buying stocks of their companies.

I can affirm that the central bank will not make concessions in tightening securities investment loaning.


According to SNV, the foreign currencies remitted to Vietnam in the first six months of 2007 saw an increase of 12% over the same period of last year. There were not big changes in interest rate policies of commercial banks. Vietnam’s foreign currency reserve in 2007 may increase, equivalent to the payment for 20 weeks of imports.

There have been more than 20 banks that have issued 6.2mil payment cards, four card alliances which own more than 3,800 ATMs. The payment of salary and other services are being carried out in HCM City, Hanoi, Hai Phong, Da Nang and some other localities.

Source: VNE