Banking Thought Piece - New circulars to address bottlenecks in the economy
  • 2023-04-25T00:00:00
  • Sector Reports

* On April 23, 2023, the State Bank of Vietnam (SBV) issued two new circulars: (1) Circular No.02/2023/TT-NHNN (referred to hereafter as Circular 02), which provides banks with a legal framework to restructure loan repayment terms and maintain the loan group for corporate customers facing difficulties in production and/or business activities as well as for retail customers who have difficulties repaying loans, and (2) Circular No. 03/2023/TT-NHNN (referred to hereafter as Circular 03), which amends and supplements Circular 16/2021/TT-NHNN in the regulation of corporate bond trading by credit institutions. 

* In our view, circular 02/2023 based on the debt restructuring mechanism that was used and demonstrated efficiency during the COVID-19 pandemic. Circular 02 aims to support all sectors of the economy as customers who are facing difficulties can obtain access to other  bank loans to maintain their normal business.  However, we think the real estate sector could be one of the biggest beneficiaries as it now has tools to spread out difficulties over several years to resolve issues, which will help to avoid the collapse of companies — especially real estate developers — that could lead to systematic risk. As for banks, the ease on pressure for customers — especially real estate developers — will also help to ease the pressure on banks, which could lead to lower credit costs. 

* The key change in Circular 03 vs Circular 16 is that credit institutions can buy back unlisted corporate bonds after selling them without having to wait for 12 months as long as these corporate bonds meet the requirements.  

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