Vietnam banks anxiously wait to be assigned credit growth limits

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Some bankers in Vietnam are nervously awaiting the announcement of credit growth targets for 2012, fearing that limits as low as zero assigned by the central bank could affect their business plans.

The State Bank of Vietnam said early this week that for the first time, it will allocate different credit caps for domestic lenders. Banks have been divided into four groups based on their health and will be assigned loan growth limits of 17 percent, 15 percent, 8 percent and zero respectively, depending on which category they fall into.

A senior manager at a small bank in Hanoi said he is still waiting for an official announcement, but expects that his bank will only be permitted a credit growth rate of 8 percent.

"If that really is the case, we will have to review our business plan because our original credit growth target was more than 10 percent," he said.

Another banker who also wished to remain unnamed said his bank has recently increased its registered capital to VND3 trillion. With restricted lending, it will be difficult to ensure high dividend payouts for shareholders as they were promised previously, he said.

The central bank has yet to name the banks in each of the four groups. Officials said various factors were considered when classifying banks, including capital, management, asset quality and their compliance with policies and requirements.

Can Van Luc, senior consultant at state-owned Bank for Investment and Development of Vietnam, said the credit limits assigned to the four groups of banks are reasonable and will help achieve the credit growth target of 15-17 percent which has been set for the overall banking system.

However, the large gaps between the limits show that huge differences exist in terms of capabilities within the banking system, with some lenders being allowed to issue twice the amount of credit as others, he said.

"The State Bank of Vietnam must have left the gaps that wide in order to force weaker banks to improve and increase the competitiveness of the system," Luc said. "But it also seems like the central bank wants to speed up the restructuring process and M&A activity among weak banks in the lowest category."

Luc said he was in favor of withholding the names of lenders in each category. If depositors know that their banks are ranked in the lowest group, they would rush to withdraw all their money out of anxiety, he said.

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