Vietnam foreign bankers confused by lending rules
HANOI - Foreign bankers in
Vietnam said on Thursday they were increasingly
confused by central State Bank moves to clarify
new lending rules.
One bank manager said the situation was
becoming so serious that the issue would have to
be addressed at diplomatic levels.
``The time is fast approaching when foreign banks
and companies need to take this to their
embassies to raise the issue to a higher level,'' he
said.
From March until the end of May, Nguyen Dinh
Tu, the State Bank's deputy chief inspector, has
written a number of letters to foreign banks
requesting they reduce lending exposure in time
for the October deadline when the new rules are
due to take effect.
The new banking law will limit banks' lending to
individual customers to the equivalent of 15
percent of their registered capital.
By law foreign banks must have a minimum
registered capital of $15 million, plus an extra $5
million for the few banks that have been permitted
to open a second, sub-branch.
The new rules would cap foreign bank branch
lending at maximum sums of between $2.25
million and $3.0 million -- levels that offer slim
returns, bankers said.
While current rules cap lending at 10 percent of
registered capital, the State Bank has issued
waivers on the back of head office guarantees
that push lending limits substantially higher.
From October 1, waivers would no longer be
permitted, the State Bank has indicated.
Bankers have said that the planned changes could
lead to bank pullouts and job losses, while major
state-owned firms and foreign-invested
companies would suffer as credit dried up.
Trade would also be hurt, with companies unable
to obtain letters of credit that exceeded their
bank's 15 percent limit.
In response many foreign banks wrote letters of
complaint to the State Bank explaining how their
business and the economy in general could be
adversely affected.
``This regulation is not the best way to keep the
economy going and I think based on the foreign
banks reaction ... there is an underground political
lobby starting which hopes to stop the ship before
it sails into port,'' a foreign bank executive said.
He said the original rationale behind the move
might have been to force foreign banks in
Vietnam to increase their capitalisation.
``Who is going to put in more money into this
country ... because the return is far below the
minimum levels required by head office,'' he said.
``For being paid for the risk you should have a
higher return but we have a lower return.''
A Western lawyer has said the new lending rules
could amount to ``creeping expropriation of
business'' that would be at odds with international
treaties signed by Vietnam.
An official at the State Bank told Reuters that
Nguyen Tan Dung, newly appointed central bank
governor, would soon write to foreign banks
about the lending issue.
``The letter on this will be issued soon, in a
couple of days,'' the official said. ``We can tacitly
understand that (for the moment) foreign bank
branches can keep operating as normal.''
He said when the new law came into effect in
October, guidelines would be issued stating
whether the 15 percent limit applied to the
registered capital of foreign bank branches or
their parent organisations.
Central Bank Governor Dung is due to hold his
first formal news conference on Friday, although
resident foreign correspondents have not been
invited to attend.
By Andy Soloman - REUTERS, June 4, 1998.
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