Headquarters of the State Bank of Vietnam. The Government believes that the SBV’s Governor should have the power to decide on special loans for banks under restructuring. — Photo sbv.gov.vn

The Government has proposed to assign the Governor of the State Bank of Vietnam (SBV) the power to issue special loans with 0 per cent interest rate for banks that are under restructuring.

The proposal was one of conclusions under the Government’s Resolution 05/NQ-CP that was issued after a recent Government meeting on law making.

According to the resolution, the Government basically agreed with contents related to criteria for early intervention, special control and handling of real estate collateral, in the draft amended Law on Credit Institutions proposed by the SBV in Report 166.

However, the Government revised some other contents of the draft law. Specifically, regarding the authority to regulate debt group classification, risk handling and the authority to decide on special loans with interest rates of 0 per cent per year, the Government makes different proposals with the SBV’s.

In the latest draft law, the SBV proposes special loans with 0 per cent interest rate for banks under a restructuring plan to be decided by the Prime Minister. However, the Government believes this authority should be assigned to the SBV’s Governor because this is a specialised issue within the field of the SBV.

For granting credit quota to one customer; and one customer and his/her related person, the Government also proposes amendments to ensure flexibility in credit granting management. The specific roadmap for the amendments should be implemented according to Government regulations.

Previously, in April 2023, SBV Governor Nguyễn Thị Hồng signed Report 166 to send to the National Assembly the draft amended Law on Credit Institution that has many new regulations on risk prevention.

According to the SBV’s draft law, credit institutions will receive the Government’s supports to prevent risks during their restructuring. Under the support measures, credit institutions will not be subject to sanctions for lack of required reserves or non-compliance with the prescribed safety ratio when they suffer mass deposit withdrawal.

Credit institutions which experience mass deposit withdrawals may borrow special loans with the interest rate of 0 per cent per year from the SBV, Vietnam Deposit Insurance, Vietnam Cooperative Bank and other credit institutions, according to the provisions of the Law on Credit Institution. The SBV will decide to temporarily stop transactions at credit institutions that are subject to mass deposit withdrawals. — VNS