Banks cannot lend based on any forms of guarantee by other credit institutions. -- File Photo

HA NOI (Biz Hub)— Starting next February, total outstanding loans that commercial banks and branches of foreign banks may offer for stock investment cannot exceed 5 per cent of their charter capital, according to a circular issued yesterday by the State Bank of Viet Nam (SBV).

Credit institutions are qualified to lend for stock investment if their bad debt ratios are below 3 per cent. Loans offered for stock investment cannot be guaranteed by the stocks themselves. Banks also cannot lend based on any forms of guarantee by other credit institutions.

Experts did not expect the new regulations to hurt capital inflow in the stock market.

A leader of the SBV's banking inspection and supervision agency told the website VnEconomy that the limit actually gave more room for lending than the old rule.

Circular 13, issued in 2010, stipulated that total outstanding loans for securities investment (which includes stocks, bonds and other securities) could not exceed 20 per cent of banks' charter capital. Of that 20 per cent, the majority of lending went to bonds and just a small proportion to stock investment.

Now banks would have more money to lend to stocks, he said.

In a November 18 report, HCM Securities Co estimated the total charter capital of all credit institutions in the banking system at VND435 trillion (US$20.4 billion), meaning banks could lend around VND21.75 trillion (over $1 billion) to stock investment. This number is still higher than total margin lending of around VND17 trillion ($798 million) on the stock market as of October.

The current size of transactions on both stock exchanges is modest, with just VND3-4 trillion ($141-188 million) worth of shares traded each session.

Senior analyst at MB Securities Co Do Bao Ngoc said the new regulations could have a short-term psychological impact on investors but would not significantly affect investment in the market.

In the medium and long term, the regulation aimed to ensure basic conditions for stable market development, encouraging sustainable investment rather than depending on bank lending, Ngoc said.

The circular also slashes the risk ratio of lending to securities and real estate investments from 250 per cent to 150 per cent, a move that SBV hopes will promote development of real estate and stock markets. — VNS