Increase the ratio of short-term capital sources used as medium- and long-term loans

From January 01, 2020, the Circular No. 22/2019/TT-NHNN on limits and prudential ratios in operations of banks and/or foreign bank branches comes into effect.

Circular No. 22/2019/TT-NHNN: Increase the ratio of short-term capital sources (Picture)

The Circular points out clearly that banks and/or foreign bank branches are entitled to use short-term capital sources as medium- and long-term loans under the following maximum rate schedule:

From January 01, 2020 to the end of September 30, 2020: 40%;

From October 01, 2020 to the end of September 30, 2021: 37%;

From October 01, 2021 to the end of September 30, 2022: 34%;

From October 01, 2022: 30%.

In previous regulations in the Circular No. 16/2018/TT-NHNN, the ratio of short-term capital sources used as medium- and long-term loans in foreign bank are agreed at the rate of 40%.

As according to the new regulations prescribed at the Circular 22, the State Bank of Vietnam has imposed strictly action in tightening the short-term capital sources for the use of medium - and long - term loans.

In reality, banks in general and branches of foreign banks in particular shall use short-term capital sources used as medium – and long – term loans to have positive impaction to the credit activities. This is the reason for many risks and difficulties in liquidation and bad debts in real estates within that the medium – and long – term loan for 01 – 02 years take the bigger proportion,

The Circular 22/2019/TT-NHNN is issued on November 15, 2019 and shall come into effect on January 01, 2020.

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