Dr. Ho Quoc Tuan: Excluding 18 large projects from credit calculations poses a new question in banking risk management

According to Dr. Ho Quoc Tuan, "loosening the room" for priority projects needs to be viewed more broadly within the challenge of capital management, as growth must go hand in hand with controlling banking risk.

Recently, the State Bank of Vietnam issued a document to commercial banks on considering extending credit to projects proposed by Vingroup, Sun Group and Masterise Aviation Infrastructure JSC.

Accordingly, credit that commercial banks extend to these three enterprises to implement the projects on the list will be excluded when calculating the banks' annual credit growth. This provision applies to the outstanding credit balance and new loans arising during the implementation of the projects.

According to the published list, there are 18 projects related to areas such as projects serving the APEC Summit, high-speed rail, Gia Binh International Airport and several projects invested under the PPP model, with a total capital mobilization requirement of about 752,140 billion VND.

The SBV said the capital needs for the projects are very large, and encouraged banks to coordinate in syndicated lending to meet the financial resources.

If a loan exceeds the credit limit, the bank must report to the SBV to submit it to the Prime Minister for consideration in accordance with regulations. Excluding outstanding balances from credit growth calculations does not mean that a loan is automatically approved. Banks must still appraise project efficiency and repayment capacity, and bear responsibility for the credit extended.

Mr. Tuan believes that "loosening the room" is not only a signal about the orientation to promote growth but also reflects a larger challenge in policy management.

According to a recent sharing by Dr. Ho Quoc Tuan, Senior Lecturer at the University of Bristol, United Kingdom, assessing this policy needs to be placed in the broader context of credit management orientation rather than focusing only on the specific enterprises that benefit.

The reality is that "loosening the credit room" does not apply only to one specific group of enterprises. Previously, the State Bank of Vietnam also decided not to count the additional outstanding balance for certain sectors such as social housing, industrial parks and export processing zones within banks' real estate credit control limits this year.

Excluding the outstanding balance of these 18 projects is expected to create additional credit room for projects assessed as having a role in promoting growth.

From here, the question raised is not only the impact of the policy on each project but, more broadly, the role of the credit room in managing the banking system.

According to Mr. Tuan, the essence of the issue lies not only in a few enterprises benefiting, but in the fact that the approach to credit management is changing.

When a loan is considered to serve growth objectives, infrastructure development or priority sectors, could excluding it from the "room" become a broader precedent in the future?

The credit room and the challenge of risk management

This question is all the more notable when looking back at the nature of the credit room. It has been a tool that has generated much debate in the management process.

Vietnam applied credit growth quotas back in the 1990s, then discontinued this tool before reintroducing it after the 2009-2010 period of instability. Reapplying the credit room aimed to control risk, in a context where the banking system was still undergoing restructuring and addressing many asset quality problems.

About three years ago, on whether the credit room should be abolished, Mr. Tuan and several experts all believed that this tool "should only be kept for another 1-2 years because it will gradually become obsolete," especially if Basel criteria are applied in a substantive manner.

As the banking system gradually approaches international risk management standards, credit control could increasingly shift toward tools based on capital, asset quality and the risk level of each bank.

The State Bank of Vietnam once argued that Vietnam cannot immediately abolish the "credit room" tool because the capital market is not yet sufficiently developed. Photo: HA

However, Mr. Tuan believes there is also a rationale for the view that the credit room should be kept.

The State Bank of Vietnam once argued that Vietnam cannot immediately abolish this tool because the capital market is not yet sufficiently developed. Vietnam's banking system is still in the process of restructuring, gradually moving toward international standards, while the capital market is still young.

Only when the capital market develops, and enterprises can access many different sources of capital - with medium- and long-term capital drawn from the market such as bonds and equities, while the banking system supplies only short-term capital - will the pressure to control the banking system's credit growth as it exists today be reduced.

Therefore, the issue is not only whether "loosening the room" promotes growth, but also how the role of this tool is changing. As more and more priority credit groups are excluded from the calculation, the question arises as to whether the credit room can still retain its original meaning of controlling risk.

From a cautious perspective, prioritizing growth could create additional momentum for the economy in the short term. But this comes with the requirement to more tightly control potential risks.

Because if the credit room is no longer the main barrier, the role of other prudential standards such as the capital adequacy ratio, risk-weighted assets (RWA) and Basel requirements will become all the more important.

In other words, Mr. Tuan believes that "loosening the room" is not only a signal about the orientation to promote growth but also reflects a larger challenge in policy management: how to expand resources for the economy while still maintaining the safety barriers of the banking system.

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Nguồn: TheLeader — theleader.vn. Bài viết được đăng lại phục vụ mục đích chia sẻ kiến thức cho cộng đồng founder và nhà đầu tư trong hệ sinh thái HCM VIF.