Governor Nguyen Thi Hong: Zero-Interest Special Loans Only Applicable to Two Cases

Special Lending at 0% Interest Rate: ‘Risk-Free’

On the morning of June 10th, the National Assembly’s Standing Committee discussed and gave opinions on the draft Law amending and supplementing a number of articles of the Law on Credit Institutions.

In the report, Governor of the State Bank of Vietnam, Nguyen Thi Hong, provided information on the policy to transfer the authority to decide on special lending with a 0% interest rate and no collateral from the State Bank.

Regarding the source of funds for special lending and the control mechanism, Ms. Hong stated that the State Bank’s special lending is from the source of funds for the central bank’s money issuance function and does not use the state budget. Therefore, the State Bank’s lending at a 0% interest rate does not pose a risk of budget subsidies.

“However, taking into account the opinions of the National Assembly deputies, the Government directs the authoring agency to review and coordinate with relevant agencies to review the provisions on handling the State Bank’s special loans under the regulations on the financial regime of the State Bank,” Ms. Hong said.

The Governor also emphasized that special lending is only applied in two cases: credit institutions experiencing a run (to pay depositors); and special lending for the implementation of the compulsory recovery and transfer plan of credit institutions under special control. This measure is only applied after the State Bank’s professional measures such as refinancing and open market operations have been implemented.

“Thus, the State Bank’s special lending activities are necessary to prevent runs on credit institutions and to limit the risk of contagion to other credit institutions, or to support the recovery plan and compulsory transfer plan to restructure credit institutions under special control,” Ms. Hong said.

The Governor also affirmed that the special lending activity aims to ensure the safety of the credit institution system, social order, and safety, without creating competitive advantages for the borrowing credit institutions.

Governor Nguyen Thi Hong said that the 2024 Law on Credit Institutions has assigned the Governor of the State Bank to detail the special lending. Implementing this regulation, the Governor has issued Circular No. 37 to detail the special lending, including specific provisions on purpose, amount, term, collateral, conditions for collateral, repayment, and responsibilities of related parties…

However, taking into account the opinions of the National Assembly deputies, Ms. Hong said that after the draft law is passed, the State Bank will review and amend Circular No. 37 related to criteria and conditions for special lending at a 0% interest rate, without collateral, and the purpose of the loan…

Request for urgent advice from competent authorities

Assessing this content, Mr. Phan Van Mai, Chairman of the Economic and Financial Committee, said that the regulation on the State Bank’s special lending interest rate is important, affecting the stability of the credit institution system, national financial and monetary security, and the resources of the economy.

As there are different interpretations among agencies, the Committee has sent a document to the Standing Committee of the Law Committee and the Judiciary Committee to summarize and report to the Party Committee of the National Assembly to request the conclusion of the competent authority on this content.

“The Economic and Financial Committee proposes that the authoring agency continue to improve the regulation on the interest rate for special lending on the basis of the opinion of the competent authority,” said Mr. Mai.

At the meeting, Mr. Tran Thanh Man, Chairman of the National Assembly, agreed with the decentralization of the authority to decide on special lending from the Prime Minister to the State Bank. At the same time, the Chairman of the National Assembly also agreed with the adjustment to remove the transitional regulation for special loans decided by the State Bank before this law takes effect.

Regarding the interest rate for special lending, the Economic and Financial Committee has sent a document to the Standing Committee of the Law Committee and the Judiciary Committee. The National Assembly Chairman requested an urgent report to the Party Committee of the National Assembly to request the conclusion of the competent authority, as a basis for the agencies to continue improving the regulation on the interest rate for special lending.