Vietnam - Four important circulars on monetary and banking sector effective from early May

Credit institutions have to reduce the foreign currency status by the end of day to 20 percent from May 2.

Under Circular No. 07/2012/TT-NHNN dated March 20, 2012 stipulating the foreign currency status of credit institutions and branches of foreign banks, effective from May 2, the foreign currency status of credit institutions and branches of foreign banks by the end of day must be at +/-20 percent of equity of those credit institutions.

Earlier, according to Decision No 1081/2002/QD-NHNN, the foreign currency status is +/-30 percent of ownership capital.

In last week, the US dollar prices of banks suddenly surged sharply. Some sources said that this may be the US dollar buying phenomenon of banks before Circular No 07 takes effect.

The State Bank of Vietnam (SBV) is to tighten lending activities in foreign currency of credit institutions from May 2.

With the issuance of Circular No 03/2012/TT-NHNN regulating the lending in foreign currency of credit institutions and branches of foreign banks to borrowers who are residents, the central bank continues to stringently tighten lending conditions in foreign currency for customers.

Accordingly, credit institutions will only lend foreign currency to pay overseas for imports of goods and services when the borrowers have enough foreign currency revenue from production and business for the repayment of the loan.

The borrowers must get approval from the central bank.

Commercial banks will stop raising certificate of deposits (C/Ds) in gold from May 1.

As per Circular No. 11/2011/TT-NHNN on terminating raising and lending in gold of credit institutions issued by the central bank, the issuance of short term C/Ds in gold of credit institutions will be terminated from May 1, 2012.

The raising and lending in gold normally has been officially banned since May 1, 2011.

Fiduciary activities of credit institutions will be constricted from May 2.

According to Circular No 04/2012/TT-NHNN dated on March 8. 2012, effective from May 2, credit institutions and branches of foreign banks will not be allowed to receive fiduciary of individuals.

As per the Decree No 24/2012/ND-CP, the state will hold the monopoly in producing gold bullion and exporting and importing gold raw materials for gold bar production.

Buying and selling of gold bars of institutions and individuals will be done at credit institutions and enterprises that have license from the central bank for trading gold bullion.

Credit institutions with bad debts ratio at 10 percent for three consecutive months will be limited credit growth.

Under Circular No 10/2012/TT-NHNN dated on April 16, 2012, effective from May 30, credit institutions with bad debts ratio at 10 percent for three straight months will be limited credit growth.

Credit institutions will be also limited credit growth if their capital adequacy ratio (CAR) is at less than 8 percent for six consecutive months or violating credit limit for one customer or group of customers twice or more in its financial year or violating credit limit and conditions for securities investment or trading activities.

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