Home buyers could benefit from potential credit loosening

It is very likely that home buyers could benefit from potential credit loosening, Do Thi Nhung, deputy director of Monetary Policy Department (the State Bank of Vietnam) was quoted as saying at the workshop on capital solutions for small and medium-sized enterprises from banks' perspective held by VCCI on 6 April.

In addition to shoring up banks' liquidity, appropriate credit limits for unprivileged subjects like consumption and home lending would be considered, she said.

Pursuant to the central bank's Notice 01 dated 13 February 2012, outstanding credit to discouraged sectors including securities investment and trading, consumption lending and real estate and investment trading over the total outstanding credit of a credit institution has been capped at 16pct for this year. Importantly, outstanding credit to low-income housing and nearly finished housing development projects that is about to be brought onto the market this year is excluded from that to property investment and trading.

Flexible monetary policy together with tamed inflation, improved banks' liquidity and fairly ample capital is expected to push interest rates down further by the year end.

First and foremost, mobilisation ceiling rate is likely to fall by 1pct to 12pct per year laying foundation for lending rate cuts, said Nhung.

Additionally, she highlighted the importance of commercial banks' trimming down operation costs paving the way to access cheap loans. Also, it is suggested that debt structures of troubled enterprises due to extensive inventories and stagnant business be restructured.

As for addressing liquidity, flexible monetary policy would continue so as to better channel capital flows. Also, credit institutions are highly recommended to concentrate on funding small and medium-sized enterprises and raise the proportion of medium and long term capital for safe capital structure.

Notably, credit institutions are encouraged to develop derivative products in accordance with international standards. Large-scale banks such as VietinBank and MB have recently been licensed to conduct such businesses as product price insurance and interest rate swap which would help lenders with risk hedging and assist exporting and importing as well.

Also, the central bank would consider improving assessment capacity of commercial banks in order to facilitate loaning on the basis of borrowers' reputation rather than collateral. Enterprises of efficient financial capacity would, therefore, be able to approach bank loans. - Source: Vietbiz24