Brian Jeffrey
SBV’s Credit Regulation Approach
Pham Quang Dung, the Deputy Governor of SBV, highlighted at a recent event the bank’s proactive and adaptable methods in managing credit, ensuring that both businesses and individuals can access banking services effectively.
Each year, the central bank allocates credit growth quotas to commercial banks based on their operational performance and overall macroeconomic conditions. However, there is a current initiative to phase out this quota allocation system, as requested by both the National Assembly and the government.
Impact of Potential Quota Removal
Economists support the idea of eliminating the quota allocation system, believing it will enable banks to better formulate their business strategies. Furthermore, regulatory authorities could rely on mandatory reserve requirements to prevent excessive credit expansion.
Current Credit Growth Rates
Recent financial reports revealed that as of June 30, eight banks achieved credit growth rates exceeding 10%. The banks anticipating a lift in credit growth limits include NCB (16%), LPBank (15.2%), HDBank (13%), Techcombank (12.9%), ACB (12.8%), MSB (11.4%), NamA Bank (10.7%), and VietBank (10.2%).
Earlier this year, the SBV established a 15% credit growth limit for the entire banking sector for 2024, distributing these quotas at the year’s start.
On August 28, the SBV announced that banks reaching 80% of their allocated credit growth can increase their outstanding loans.
Calls for Quota Termination
In May 2024, National Assembly Deputy Ha Sy Dong requested the abolishment of credit growth limits. While this scheme is intended to manage inflation and support macroeconomic stability, it has led to inefficiencies in market operations through unnecessary ask-and-grant practices.
Using Interest Rates as a Regulatory Tool
The SBV employs interest rates as a means to influence financial activities, enhance economic growth, and bolster production efforts. Adjustments to these rates can be made as needed to align with specific economic targets over time.
International Perspectives on Credit Control
Eminent economist Le Xuan Nghia pointed out that other nations manage credit and inflation by employing systematic safety ratios, such as return on assets (ROA), return on equity (ROE), and capital adequacy ratio (CAR).
According to the National Assembly’s Resolution 62/2022, the government has been advised to limit the ongoing use of the quota scheme prior to its total abolishment.
