The leaders of the State Bank of Vietnam are directing units to speed up the preparation of guidance documents for the Law on Credit Institutions in 2024.
The Law on Credit Institutions in 2024 was passed by the National Assembly at its extraordinary 5th session, 15th legislature. The law consists of 15 chapters and 210 articles, increasing by 5 chapters and 47 articles compared to the current Law on Credit Institutions, with many new regulations. In particular, the credit limit regulation is a content of concern and is stipulated in Article 136 of the Law on Credit Institutions in 2024.
Specifically, in case 1, the total credit limit for a customer: a customer and related person of the customer of a commercial bank, cooperative bank, foreign bank branch, people’s credit fund, microfinance institution must not exceed the following ratios:
From July 1, 2024, to before January 1, 2026: 14% of equity for a customer; 23% of equity for a customer and related person of the customer;
From January 1, 2026, to before January 1, 2027: 13% of equity for a customer; 21% of equity for a customer and related person of the customer;
From January 1, 2027, to before January 1, 2028: 12% of equity for a customer; 19% of equity for a customer and related person of the customer;
From January 1, 2028, to before January 1, 2029: 11% of equity for a customer; 17% of equity for a customer and related person of the customer;
From January 1, 2029: 10% of equity for a customer; 15% of equity for a customer and related person of the customer.
In case 2, the total credit limit for a customer must not exceed 15% of the equity of a non-bank credit institution; the total credit limit for a customer and related person of the customer must not exceed 25% of the equity of a non-bank credit institution.
The total credit limit specified in the above two cases does not include loans from entrusted capital sources of the Government, institutions, individuals that the credit institution, foreign bank branch receives entrusted without assuming risks or cases where the borrower is another credit institution, foreign bank branch.
Mr. Pham Nhu Anh, CEO of the Military Commercial Joint Stock Bank (MB)
The credit limit specified in the above two cases includes the total amount of purchase, holding, investment in bonds issued by customers, related person of the customer.
Regulations on credit limit in case the capital needs of a customer and related person of the customer exceed the credit limit
In case the capital needs of a customer and related person of the customer exceed the prescribed credit limit, the credit institution, foreign bank branch can grant credit in accordance with the regulations of the Governor of the State Bank.
In special cases to implement economic – social tasks that the capital contribution capacity of credit institutions, foreign bank branches cannot meet the needs of a customer, the Prime Minister shall decide the maximum credit limit in case the total credit limit exceeds the prescribed limit for each specific case.
Discussing the impact of the Law on Credit Institutions in 2024 from the perspective of commercial banks, Mr. Pham Nhu Anh, CEO of Military Commercial Joint Stock Bank (MB), said: The new law will take effect from July 1, 2024, but a reduction needs to have a roadmap.
MB has actually managed risks tightly so the new law does not have a significant impact. Specifically, according to the current Law on Credit Institutions, it is possible to lend using own capital up to a maximum of 15% for a customer; lending with own capital to a customer and related person of the customer up to a maximum of 25%. Meanwhile, MB manages customer lending at 10% and group of customers lending at 20%, which is below the maximum allowed threshold.
