State Bank of Vietnam Issues New Regulations for 2015

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HANOI – The State Bank of Vietnam (SBV) has issued a number of regulations for 2015. These new laws, which seek to help the country achieve its economic growth targets in 2015, touch on areas such as foreign currency loans, reducing bad debts, and money laundering.

Through Circular 43/2014/TT-NHNN, the SBV has extended permission for credit institutions to offer short-term foreign currency loans until the end of 2015. Circular 43 replaces Circular 29/2013/TT-NHNN, which expired at the end of 2014.

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Forex-licensed credit institutions, including foreign bank branches, may provide short-term loans in the form of foreign currency to petroleum-importing enterprises requiring additional capital, or companies manufacturing and trading commodities for export. The Circular also permits borrowing by importing companies with licensed overseas investment projects.

SBV Deputy Governor Nguyen Thi Hong has explained that the policy aims to help Vietnam achieve its 2015 growth target of 6.2 percent by providing practical solutions. The extension will continue to keep borrowing costs down for businesses, as foreign currency lending rates are often lower than their VND equivalents. Petroleum enterprises account for approximately six percent of outstanding foreign currency loans in the banking system, with export businesses making up 24 percent.

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Resolution No.1/NQ-CP, issued at the beginning of January, laid out a number of tasks and solutions that will need to be implemented in order to continue the socio-economic development of the country and conform to the 2015 state budget.  In pursuit of these goals, the SBV has been granted responsibility for the legal framework covering the management, purchase, and sale of bad debts and collateral, as well as for defining the responsibilities of borrowers and rights of creditors. Bad debts were at 5.43 percent of total outstanding loans in September 2014, a figure the SBV aims to reduce to three percent in 2015. This is expected to lead to the SBV purchasing VND100 trillion (US$4.7bn) in bad debts this year, down from VND123 trillion (US$5.8bn) in 2014.

In addition to tackling bad debt, the SBV has streamlined processes for banks following “Know Your Customer” (KYC) rules on individual and corporate customers through the issuance of Circular No. 31/2014/TT-NHNN on November 11, 2014. The Circular requires financial institutions to report international online transactions worth over US$1,000 or equivalent, or local transactions of over VND500 million (US$23,400) or equivalent to the SBV. Transactions carried out between institutions or via credit, debit and prepaid cards are not required to be reported.

Furthermore, under Circular 31, financial institutions are now obliged to collect data on the total revenues of suspect organisations over the previous two years, and to list members of boards of directors and legal representatives. The average income of those individuals deemed likely to engage in money laundering will be gathered for the preceding three months.

The SBV has also been active in Vietnam’s monetary policy, having announced a one percent increase in the inter-bank exchange rate on January 6, 2015. SBV Governor Nguyen Van Binh has announced the intention to allow the exchange rate to rise by a maximum of two percent in 2015. Nguyen has also set a credit growth target for Vietnam of 13-15 percent in 2015, having reached 13 percent by the end of 2014.

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