Banks that provide loans for securities investment must heed the State Bank’s Official Letter No. 7021/NHNN-CSTT of June 28, guiding the implementation of Directive No. 03/2007 of May 28, on controlling the amount of loans which may be made for securities investment and trading.
According to the official letter, which was issued just two days before the effective date of the Directive, credit institutions with loans and discounted commercial papers secured by securities investment and trading in excess of 3% will have only six months (from July 1 to December 31) to recover loans in excess of the limit.
With this document, the State Bank goes further in clearly defining the categories of loan which are considered in computing the bank loan balance. Accordingly, the balance of loans for securities investment and trading, apart from loans specified in Directive No. 03, also include advances for customers who have sold securities and are intending to use loans to buy securities; loans for customers to pay deposit deficits when their buy orders are matched; and loans and discounts of commercial paper in other forms for customers to buy securities.
Most banks insist their lending levels are kept under control and that they have plans to cope with risks, but they now have no choice but to refuse new loans and to take active measures to recover all loans against securities in order to get closer to the mandated ratio. Banks with a ratio of securities loans of more than 10% of all loans will be placed under the constant and strict supervision by the State Bank Inspectorate, which is assigned with specific responsibilities under the official letter.