State Bank issues circular to reduce risk coefficient for some real estate loans

The State Bank of Vietnam (SBV) will adjust the risk coefficient of some real estate loans such as: social housing, industrial park real estate...

These are the provisions announced in Circular No. 22/2023/TT-NHNN amending and supplementing a number of articles of Circular 41/2016/TT-NHNN regulating capital adequacy ratios for banks and foreign bank branches, effective from July 1, 2024.

Circular on reducing risk coefficient for some real estate loans 1 — State Bank of Vietnam issues Circular 22 adjusting the risk coefficient of some real estate loans (Photo TL)

Notably, the circular adjusts the regulations in Circular 41 on the credit risk ratio (CRW). In particular, loans for buying social housing, buying houses, building houses under government support programs and projects will have their risk ratio adjusted down to a maximum of 50%. The loan-to-value ratio (LTV) is also adjusted from 100% or more and the income ratio (DSC) is over 35%. The minimum risk ratio is 20%, corresponding to LTV below 40% and DSC below 35%.

The risk coefficient for the remaining home loan cases will remain the same between 25% and 100% as in Circular 41, depending on the LTV and DSC ratios.

In addition, Circular 22 also adjusts the credit risk coefficient for assets that are specialized credit facilities in the form of credit facilities to finance industrial park real estate business projects from 200% to 160%.

For loans serving the purpose of agricultural and rural development as prescribed by the Government, Circular 22 also stipulates an additional risk coefficient of 50%.

Finally, Circular 22 stipulates that banks are the mandatory transferees and other credit institutions are allowed to apply a risk coefficient of 0% to loans, guarantees, and deposits at the mandatory transferee according to the approved mandatory transfer plan.

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