New Credit Allocation Mechanism by SBV Suitable for the Current Period
At the Conference of the Government’s Standing Committee with joint-stock commercial banks on solutions to contribute to the country’s socio-economic development, chaired by the Prime Minister in the afternoon of September 21st, Mr. Do Minh Phu, Chairman of the Board of Directors of Tien Phong Commercial Joint Stock Bank (TPBank), pointed out the reasons for the credit growth in the past time, as well as clearly stated the obstacles and proposed solutions.
According to Mr. Phu, due to a number of influencing factors, credit growth in the first months of the year was slow. Then, in the past six months, especially until the end of the third quarter of 2024, credit has accelerated. The Chairman of TPBank mentioned three main reasons for the credit growth rate increase.
First,
it is the strong and effective governance of the Government and the Prime Minister, which has helped stabilize the economy and gradually show positive signals.
Mr. Phu cited statistics that in the first eight months, Vietnam achieved a GDP growth rate of about 6.42%, with a trade surplus of about $19 billion. This has greatly supported the promotion of credit demand. “This is an important, fundamental, and prerequisite issue because if the economy does not recover, credit demand will be weak, capital absorption capacity will be poor, and banks will find it difficult to increase credit, even with low-interest rates,” emphasized the Chairman of TPBank.
Mr. Do Minh Phu, Chairman of the Board of Directors of Tien Phong Commercial Joint Stock Bank (TPBank), speaks at the Conference – Photo: VGP/Nhat Bac
Besides, Mr. Phu highly appreciated the role of the SBV’s monetary policy management in the past time. Looking back a few months ago, the exchange rate sometimes reached VND 25,700, close to VND 26,000/USD, but now the exchange rate has cooled down significantly. The interbank interest rate has also decreased considerably, creating favorable conditions for banks to maintain reasonable interest rates.
Also, according to Mr. Phu’s assessment, the new credit allocation mechanism implemented by the SBV is quite suitable for this period, meaning that banks are proactive in calculating based on the SBV’s ranking.
Mr. Phu directly mentioned the case of TPBank. Last year, when the bank was ranked A, it was given 4.5 points. Then, the SBV allowed banks to multiply this score by 3.5%, immediately calculating the credit growth rate for 2024 proactively.
As of August 2024, more than a month ago, the SBV continued to allow the application of a new calculation method. Accordingly, banks that have reached 80% of credit growth will be multiplied by an additional 0.5%. In the case of TPBank, which is ranked A, the additional quota will be about 2.5%. Therefore, the total credit limit for 2024 will be about 18.5%.
In addition to the policies of the management agency, Mr. Do Minh Phu acknowledged the efforts of the commercial banks, which have actively participated and proactively sought solutions to promote credit growth.
Obstacles in Handling Secured Assets Need to be Removed
Regarding obstacles and proposed recommendations, the Chairman of TPBank said that a common difficulty for banks nowadays is debt collection. Currently, Resolution 42 of the National Assembly on the pilot handling of bad debts has expired. Consequently, there is no legal document to support quick, decisive, and lawful debt collection. This situation puts debt collectors at risk of violating legal regulations and facing criminal charges.
Mr. Phu suggested promptly supplementing legal regulations to hold borrowers more accountable for their loans. At the same time, it is necessary to remove obstacles in handling secured assets and overcome the prolonged litigation procedures, which cause difficulties for banks.
Regarding solutions to unfreeze the real estate market, Mr. Do Minh Phu shared that banks are looking forward to the early issuance of a Resolution on piloting commercial housing projects through agreements on the acceptance of land use rights, where the land is not for residential purposes. If this Resolution is implemented soon, commercial projects without residential land but with potential, suitable planning, and compliance with the policy of developing commercial housing with residential land will solve difficulties for many real estate businesses.
Particularly, the leader of TPBank expressed his impression with the way the Government leaders closely supervise the progress of constructions, especially key projects that have been implemented recently.
Mr. Phu said, “We are truly touched to witness the dedication and determination of those involved in the projects to bring them to fruition. For example, the 500 kV power line Project from Quang Trach to Pho Noi, the Tan Son Nhat Airport renovation project, and the Long Thanh Airport project. We have felt the spirit of ‘Overcoming the sun, winning the rain, not losing to the wind and storms,’ and ‘Eating hastily, sleeping urgently, constructing in 3 shifts, and 4 groups.’
From the above, according to Mr. Phu, leaders of private joint-stock commercial enterprises and banks should ignite their pride and kindle their aspirations.
“Only then can we achieve miracles like some projects have proven in the past time. When aspirations are ignited, our country will surely rise to a new era. That is also our wish, as representatives of private enterprises and banks,” expressed the Chairman of TPBank.
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