Securities fluctuate with Circular 36

The banking system is in the process of strong restructuring, focusing on credit quality and transparency of capital flows.

Specifically, this document stipulates that the total outstanding loan balance for investment and stock trading must not exceed 5% of the charter capital or allocated capital of banks.

According to experts, Circular 36 only affects the market in the short term.

`In recent times, unreasonable and untight control of bank credit capital invested in securities has led to unusual fluctuations in the market at times, causing great risks in many credit institutions. There has been an application

According to Chairman of the State Securities Commission – Vu Bang, Circular 36 will be a good solution to control capital flows and increase transparency in lending activities of banks, but in the short term it may have negative impacts.

Vice Chairman of the National Financial Supervisory Commission Truong Van Phuoc also commented that the above regulations reflect the operator’s will to make the banking system healthy through reducing cross-ownership.

First, the margin lending activities of some securities companies will be affected, because many organizations are currently using cash flow from banks for this field.

Inspection and supervision data of the State Bank shows that by the end of November 2014, total outstanding loans for investment and stock trading of credit institutions reached more than 20,130 billion VND.

In this context, some securities companies said that banks had stopped disbursing new loans.

On stock forums, members continuously complain about the effect of Circular 36 on the last trading session of the month before Lunar New Year.

`The fact that Circular 36 is about to take effect from the beginning of February affects investor psychology. Negative information related to the interruption of margin supply by some large securities companies has caused the two indexes to suffer.

However, sharing the same opinion as the Securities Commission, many opinions believe that Circular 36’s impact on the stock market is only short-term.

Sharing the same opinion, BVSC believes that the imposition of limits on investment loans and stock trading will generally not have a strong impact on the margin supply of large securities companies because most of these companies have proactively mobilized

Specifically, VnDirect affirmed that margin activities will not be affected because the company has equity of more than 1,800 billion VND to `be self-reliant`.

Some other units are also actively issuing bonds to supplement capital and serve margin transactions.

`Circular 36 will handle the issue flexibly, flexibly, and softly, not a very serious problem. Securities lending focuses on 15 banks, with charter capital not too large,` Mr. Phuoc assessed.

At the Bank for Industry and Trade (Vietinbank), General Director Le Duc Tho said that outstanding loans for stock investment and business accounts for only 1% of charter capital, and according to the State Bank, the average number for the entire system

Regarding the fact that banks with a high bad debt ratio of over 3% will not be allowed to lend securities, the General Director said this move will help ensure the capital of the banking system and the quality of investment loans.

In addition, the management agency still leaves the `door open` for securities investment loan contracts signed before February 2015 to continue to be implemented, rather than `interrupting` immediately.