Governor: State Bank does not prohibit real estate lending

Stating that outstanding debt in the real estate sector in Vietnam currently accounts for about 20%-21% of the total outstanding debt of the economy, the Governor affirmed that the State Bank does not prohibit banks from lending to real estate.

The State Bank does not prohibit real estate lending. (Photo: Vietnam+)

At the question-and-answer session on November 11, many National Assembly deputies sent questions to State Bank Governor Nguyen Thi Hong about credit sources for real estate.

Delegate Do Huy Khanh (Dong Nai) raised the issue that Vietnam's real estate credit accounts for about 20%-21% of total outstanding debt while this ratio in China is often higher than 30%. "So, is there still room for real estate lending and what is the Governor's opinion?" the delegate asked.

Responding to this issue, Governor Nguyen Thi Hong said that granting credit to which sector and at what rate depends entirely on the decision of commercial banks, based on mobilized capital.

Currently, there are banks that can mobilize a lot of long-term capital, and there are banks that can mainly mobilize short-term capital. Currently, 80% of the capital mobilized by the banking system is short-term. Meanwhile, real estate credit is mainly long-term. Therefore, when lending, banks must rely on their ability to balance capital, ensure the principle of safety, and ensure that when people withdraw money, banks have the ability to repay.

"The State Bank has no regulations prohibiting lending or real estate lending," Ms. Hong affirmed.

Regarding the question of delegate Ho Thi Minh (National Assembly Delegation of Quang Tri province) about banks "running around" to increase credit growth and the proposal to limit real estate credit, the Governor said that the State Bank always puts system safety first.

The State Bank's management goal must be to contribute to controlling inflation and stabilizing the macro economy while still ensuring the safety of the banking system's operations. The safety of the banking system's operations is an issue that must be placed first and foremost, because if the system of credit institutions has potential risks, it will have huge consequences for the economy due to its spreading effects.

Therefore, based on actual developments, over the past many years, the State Bank has decided to use credit room and credit limit tools, which have been implemented since 2011.

National Assembly delegate of Quang Tri province Ho Thi Minh asks questions. (Photo: Doan Tan/VNA)

According to the Governor, Vietnam's characteristic is that capital relies heavily on the banking system, so there are periods when credit growth reaches more than 30%, and in some years it increases by more than 50%, causing consequences and risks to the banking system. For example, there are banks that mobilize short-term capital but lend medium and long-term.

Therefore, since 2011, the State Bank has applied a mechanism to grant credit limits, based on the ranking of banks and their ability to expand credit. The State Bank also regularly warns banks about high credit growth, which poses potential risks.

“When we allocate and announce credit limits to credit institutions, we must evaluate them based on the credit institutions’ ratings as well as their credit expansion capabilities, along with regularly monitoring and warning credit institutions if their credit growth is high and potentially risky. There may also be credit institutions with high credit growth but good risk management, and there may be institutions with low credit growth but potentially risky, because it depends on the balance of capital mobilization terms as well as short-term or long-term credit, or granted to risky areas,” the Governor said.

Regarding real estate credit, Ms. Hong reiterated that the State Bank does not prohibit real estate lending. Banks do not lend based on the debt repayment ability of real estate businesses, but also need to base on the ability to mobilize short-term or long-term capital. Therefore, there are feasible real estate projects with debt repayment ability, but banks still have to refuse to lend if they do not match the bank's capital balance ability.

The State Bank also stipulates that credit institutions are not allowed to lend more than 30% of short-term capital for medium- and long-term loans to reduce risks to the system./.

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