Bank risk policies back on agenda

Banks have been quick to talk down risk management risks.

The State Bank last week sent a directive asking commercial lenders to assess their consumer lending systems to ensure loans have been used for the right purposes and report back by July 15.

The banking system’s outstanding consumer credit had climbed by 11.6 per cent this year to reach VND85 trillion ($4.8 billion), a growth rate that was “worth noticing”, said State Bank governor Nguyen Van Giau.

“Now that the 150 per cent interest rate cap on consumer lending has been removed, it is understandable why banks are so eager to develop this type of service. However, consumer lending will be a very lucrative business only if banks can manage credit risks properly,” said Giau.

While the lending rate for trading and manufacturing was capped at 10.5 per cent per annum, consumer credit such as loans for buying homes and cars and financing overseas studies were subject to negotiable rates, which were now ranging from 12-16.5 per cent per annum on the market.

On the other hand, a brighter outlook on economic recovery had prompted consumer demand and investment in the real estate and stock markets, thus spurring consumer credit demand, said Eximbank general director Truong Van Phuoc.

VPBank’s general director Nguyen Hung said consumption loans, which were mainly for financing house and car purchases, had increased by 20 per cent since late 2008.

Meanwhile, Dam The Thai, ABBank’s individual customer division head, also reported a 15 per cent increase in the bank’s consumption loans this year.
However, Thai said that consumer credit accounted for about 20 per cent of the bank’s total lending, which could not be said to be “too high” and the bank was confident of its risk management.

Although trying to avert an economic slowdown, the State Bank has shown efforts in tightening credit growth, as banking system bad debts had risen to 2.62 per cent from 2.17 per cent in early 2009.

Giau said that the central bank aimed to keep credit growth lower than 30 per cent this year.

VNN/VIR