Banks would increase the risk ratio to 150 percent, three times higher than the present level, for persons who ask for loans to meet their living needs and have an outstanding principal amount worth over VND 3 billion (USD 130,000).
The change is proposed by the State Bank of Vietnam (SBV) in a draft circular to replace Circular 36 of 2014, prescribing limits and prudential ratios in operations of credit institutions and foreign bank branches.
|Customers make transactions at VPBank__Photo: VNA|
Under the draft, a 100 percent risk ratio would be applied for personal loans to meet the living needs valued under VND 3 billion (except loans to buy a house valued below VND 1.5 billion (USD 65,000)).
The risk ratio of 50 percent is proposed for loans guaranteed entirely by houses (including future houses), land use rights and constructions attached to the land use rights of borrowers in three cases: (i) loans for business purposes; (ii) personal loans for purchasing social houses or houses under government support programs and projects; (iii) and personal loans for home buyers who have an outstanding principal amount of under VND 1.5 billion.
According to the SBV, the change aims at realizing the Government’s policy to improve mechanisms, policies and laws related to the real estate market, and ensuring the market’s effective and sustainable development and the banking system’s safety.
By proposing such rules, the SBV wants to control personal loans for purchasing houses in the high-end segment, and indirectly requires banks and foreign bank branches to reserve more capital for the real estate sector with potential risks.
In addition, under the roadmap until 2022, the draft plans to gradually reduce the ratio of short-term capital for medium- and long-term loans to 30 percent, instead of the current 40 percent.
The SBV also requires commercial banks to develop measures and plans to comply with such proposed regulations within six months after these regulations are enacted.- (VLLF)