New rule limits banking risks

Hanoi (VNA) - The State Bank of Vietnam has issued a new
regulation aimed at securing the stability of the nation's banking system.

Under Decision No 34/2008/QD-NHNN, issued on December 5, a credit
institution is not allowed to invest more than 11 percent of its registered
capital to any single enterprise.

The decision also limits the total capital contribution of a single credit
institution and its affiliates in a single enterprise, investment fund,
project or other credit institution to no more than 11 percent of the
charter capital of that enterprise, investment fund, project or credit
institution.

Total capital contribution by a credit institution in all related
enterprises, investment funds, projects or credit institutions must not
exceed 40 percent of the credit institution's charter capital and reserves.

The new decision also requires credit institutions to institute policies
aimed at maintaining non-performing loans at a ratio of less than 3 percent
of total outstanding loans. Financial institutions are also forbidden to
extend credit without collateral, or to provide loans at preferential terms
to an enterprise in which the institution has a controlling interest.

Total loans made to and capital underwritten by a credit institution for
an enterprise in which the credit institution has a controlling interest
must not exceed 20 percent of the credit institution's equity.

Loans without collateral to an in-house financial leasing company are
further restricted and must not exceed 5 percent of the institution's
equity.-Enditem