Securities loan shuffle

18:10 | 21/01/2008
The State Bank may lift the cap on local bank’s securities-mortgaged loans for stock trading. Currently local banks are not allowed to allocate more than 3 per cent of their total credit volume for securities-mortgaged loans for stock trading.

Financial watch dogs and banks are pulling out the stops to work the problem
The new move is expected after last week’s closed meeting between the central bank, the State Securities Commission and local commercial banks to find safer ways for banks to offer loans for securities trading.
“The central bank may set a higher ratio of loans for securities investment at each commercial bank,” said an official from the central bank.

The possible measure will make the ratio of securities-mortgaged loans for securities trading at each commercial bank different.
Le Hai Tra, a member of the Ho Chi Minh Stock Exchange management board, said risk management was highlighted as many securities companies did not have enough experience in the area.

“The central bank will move toward aborting fixed management on banking operations. Instead it will impose tougher requirements on banking operations,” said an official from a local commercial joint stock bank.
“We are not looking forward new regulation from the central bank as we have met the limit of securities-mortgaged loans for securities investment and we also have diversified investment channels,” the official said.
The State Bank issued Instruction 03/2007/CT-NHNN in May last year, putting a cap on the total securities-mortgaged loans for securities trading and investment under 3 per cent of a commercial bank’s total loans as it feared the stock market volatility would pose high risks to the whole banking system.

The possible lift of the 3 per cent cap was mulled following the downward trend of the stock market over the last few months as stock investors could not access to bank loans for continued stock trading and investment.
Critics have blamed the cap, which has partly resulted in drying up new investments in the stock market, as one of the main reason for the market to plunge.

Nguyen Ngoc Thanh, general director of VNDirect, said people have been prevented from accessing credit for securities trading while large organisations have yet to directly enter the market.
Although the cap had not been lifted, the stock market regained investor confidence with prices of most stocks in both Hanoi and Ho Chi Minh City bourses bounced backlast week after a month of recession.

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