Vietnam – Draft Circular On The Limits And Safety Ratios In The Operation Of Foreign Banks And Branches.

The State Bank of Vietnam (SBV) has recently issued a draft circular (Draft Circular) in order to replace Circular 36/2014/TT-NHNN of the dated 20 November 2014, stipulating prudential ratios and limits in activities of credit institutions and foreign bank branches (Circular 36).

The Draft Circular provides for two material amendments of Circular 36:

(i)  The Draft Circular removes non-banking credit institutions from its scope of application, while Circular 36, on the contrary, applies to all credit institutions (including banks and non-banking credit institutions) and foreign bank branches. The Draft Circular will therefore provide prudential ratios and limits only with respect to the activities of banks and foreign bank branches.

The elimination of non-banking credit institutions where finance leasing is considered as the main activity from the scope of the Draft Circular leads to the fact that finance leases are no longer included in the total outstanding balance of medium term and long term lending (Article 16.2 of Draft Circular).

(ii)  As per Article 16.5 of Draft Circular, the SBV proposes to continue to reduce the maximum ratio of short term capital which may be used for medium term and long term lending according to one of following plans.