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  • Businesses will continue to find it difficult to get loans in 2023 02/13/2023

    Feb 13th, 2023

    One of the important reasons why businesses will still face many difficulties in accessing capital this year is Dr. Can Van Luc said that the space for monetary policy is now narrowed. By the end of November 2022, the State Bank had to raise interest rates twice (1%/batch) to stabilize the exchange rate, while other tools had almost used up their space. The current foreign exchange reserves are at the recommended level of the IMF (3 months of imports). Along with that, according to Mr. Luc, the adjustment of the required reserve ratio to increase / decrease will not be as effective as expected because commercial banks still have to comply with the prudential ratios according to Circular No. 22/2019 of the State Bank and this measure is usually applied when the economy encounters major shocks. The central exchange rate's trading band has also widened to 5%. Therefore, with the possibility that the FED will continue to raise interest rates by 50% in December 2022 and the first quarter of 2023, the pressure on interest rates and exchange rates will still be quite large. In addition, the State Bank is also continuing to maintain the credit limit tool in 2022-2023 to control inflation targeting and liquidity of the banking system, in the context of the gloomy corporate bond market. Public investment disbursement is still slow, making it difficult for enterprises to access capital. The second factor, according to Mr. Luc, is forecasted that the bad debt of the economy in 2023 will increase along with the tightening monetary policy of the State Bank. In 2023, an increase in interest rates will increase the debt repayment obligations of borrowers (individuals and businesses), while the economic recovery slows down, growth is lower as mentioned above, leading to an increase in potential bad debts. It is forecasted that in 2023, the on-balance sheet bad debt will be at 2%, the gross bad debt will be around 4%. Meanwhile, the gross bad debt level of the Vietnamese credit institution system is about 4.99%, which is high when compared to other countries in the region. Third, the cross-ownership of the banking system has been basically eliminated, however, the phenomenon of shareholders and large groups of shareholders has a certain impact on investment or credit activities. Credit institutions always ensure compliance with prudential ratios (including restrictions, limits on credit extension; limits on capital contribution to purchase shares) in Circular 22/2019 of the State Bank, but the status quo associated companies, which are involved in sophisticated operations that have a certain impact on investment or credit activities. Although it is difficult to give real evidence of this behavior, the recent violations of a number of real estate corporations have revealed this related nature. Fourth, the liquidity of the banking system is not as abundant as in the past two years. After a period of consecutive decline from 34.5% in 2016 to 24% in 2021, the ratio of short-term capital for medium and long-term loans of the system gradually increased to 25.2% in June 2022; loan/deposit ratio increased from 72.1% in 2021 to 74.1% in June 2022. At the same time, highly liquid assets such as deposits of credit institutions at the State Bank decreased. Credit will increase in 2022 compared to 2020-2021 in the recovery trend of the economy. As of November 30, 2022, credit growth of the whole economy increased by 12.2%, higher than 11.5% in the same period in 2021. According to Mr. Luc, the reason why the State Bank cautiously regulates credit growth in 2022 is because the credit growth limit is a solution to control the money supply, thereby contributing to controlling inflation. Along with that, there are concerns about systemic liquidity risks, affecting interest rate stability and system safety. On the other hand, credit institutions' capital mobilization in 2022 slowed down compared to 2020-2021, due to increased cash flow into production, business, consumption and input costs. According to the General Statistics Office, by the end of November 2022, capital mobilization of credit institutions was estimated to increase by 5.5%, lower than the same period last year (6%); Accordingly, M2 only increased by nearly 7%, low compared to 9% in the same period in 2021. The main causes of low growth in capital mobilization by credit institutions include: One is inflation, rising prices and costs, businesses need more capital to cover additional costs; Rising interest rates and exchange rates also increase the financial costs of businesses. Secondly, bank credit capital controlled the increase of 15.5% while issuing credit institutions was more difficult, forcing businesses to use more capital of their own. Third, disbursement of public investment is slow, causing slow cash flow and increasing mutual debt between businesses. Fourth, the real estate and stock markets are quiet and in a healthy phase, which also leads to a backlog of capital on these two markets. And in the year, foreign indirect investment inflows only increased slightly in the condition that the USD interest rate increased and the stock market declined, the risk investment environment increased. Finally, according to Mr. Luc, the access to credit capital of enterprises will be difficult this year due to the proportion of demand deposits - low-cost sources of capital tend to decrease in 2022. Savings interest rates with maturity increasing rapidly and becoming more attractive, the difference between demand term, short term and long term widened, idle cash flow has shifted from demand deposit to term savings account to enjoy higher interest rates. At the same time, raising capital is difficult because people switch to consumption and businesses move into production and business, to cover the above costs. Faced with many difficulties in accessing capital for businesses and risks and challenges for Vietnam's financial market in 2023, Mr. Luc said that the Government needs to continue to stabilize the macro-economy. ensure the great balance of the economy. In particular, the State management agencies need to continue to closely monitor the international economic and financial situation; proactively analyze and forecast developments in the international financial - monetary market in order to have a suitable proactive response scenario; aimed at controlling inflation, stabilizing the macro-economy; closely and effectively coordinate between fiscal, monetary and other macro policies in order to control inflation, balance between controlling and promoting growth, between interest rates and exchange rates...etc. The government needs to promptly and effectively deploy the 2% interest rate support package with a scale of VND 40 trillion in order to provide financial support for businesses, increase the spread, reduce the pressure of credit capital, and reduce outstanding debts. The Government needs to have specific schemes and plans on solving capital problems for businesses and households, both to ensure economic and social recovery and development, and to ensure security and safety of the financial system. – real estate; in which, it is necessary to soon solve the risks of corporate bonds, especially real estate enterprises. For the State Bank, the Ministry of Finance and relevant ministries and branches, Mr. Luc said that it is necessary to speed up the issuance, remove obstacles to supporting legal documents and disburse the interest rate support package. % belongs to the recovery program. The timely issuance of these documents will have a dual impact, both promoting the diversification of income sources for financial institutions in the context of high interest rates and limited credit supply, and speeding up the cash cycle. , helping to increase liquidity for the system, reducing the pressure of increasing interest rates on the economy. In addition, it is necessary to accelerate the restructuring of financial institutions and financial markets (according to the promulgated schemes); pay attention to ensure the liquidity of the credit institution system, the safety of securities companies, minimize the spillover effects (banking - securities - real estate). In particular, it is necessary to create conditions for credit institutions, especially commercial banks, to increase capital, ensure operational safety, according to the requirements of the recovery program and ensure capital supply capacity. for the economy.