On December 29, 2023, the State Bank of Vietnam issued Circular 22/2023/TT-NHNN ("Circular 22") amending and supplementing several articles of Circular 41/2016/TT-NHNN ("Circular 41") dated December 30, 2016, of the State Bank of Vietnam regulating capital adequacy ratios for banks and foreign bank branches. Accordingly, Circular 22 supplements many regulations to create conditions for individuals and organizations to borrow capital.
1. To create favorable conditions for individuals to purchase social housing
To assist individuals in accessing legal loans to purchase housing; Circular 22 additionally stipulates that a loan object of a Home Mortgage Loan is a Loan for the purchase of social housing, housing purchase under the Government's support programs and policies ("Social Housing"). Accordingly, Circular 22 allows individuals to borrow capital secured by real estate from banks and branches of foreign banks to purchase social housing with many favorable regulations, specifically:
a. No request for completion schedule of housing:
Circular 22 allows individuals to borrow capital to purchase social housing when the following conditions are met:
- First: the source of repayment is not the source of rental money formed from a loan from the Bank;
- Second: banks and branches of foreign banks have full legal rights to handle mortgaged houses when customers fail to pay debts under the law on secured transactions and the law on housing;
- Third: the house formed from this mortgage loan must be valued independently (assessed by a third party or valued by a department independent of the credit approval department of the bank, a branch of a foreign bank) with the principle of prudence (the value is not higher than the market price at the time of loan approval) according to the bank's regulations.
Thus, compared with normal home loans, social housing loan conditions are more favorable when the condition of the completed house is not required to be handed over under the house purchase contract.
b. To apply a low-risk factor to the collateral of the loan:
For common home loans, the highest risk factor is up to 80-100%. However, for social housing loans, the risk factor is reduced to approximately 1/2, specifically:
|
Residential mortgage loans |
LTV below 40% |
LTV from 40% or more to less than 60% |
LTV from 60% or more to less than 80% |
LTV from 80% or more to less than 90% |
LTV from 90% or more to less than 100% |
LTV of 100% or more |
|
DSC of 35% or less |
20% |
25% |
30% |
35% |
40% |
45% |
|
DSC above 35% |
25% |
30% |
35% |
40% |
45% |
50% |
Note: "LTV" stands for Guaranteed Rate; and "DSC" stands for Rate of Income
2. To create favorable conditions for enterprises to borrow capital for the development of industrial park real estate projects
Circular 41 stipulates a risk factor of 200% applicable to all credits financing real estate business projects. However, Circular 22 reduced this factor to 160% for specialized credits financing industrial real estate business projects. This shows the incentive policy of the State for industrial park real estate development projects.
3. To create conditions for individuals to borrow capital for the development of agriculture and countryside
Circular 22 supplemented regulations on credit risk factors for loans to individuals under the Government's regulations on credit policies for the development of agriculture and countryside. Accordingly, the credit risk factor in this case is only 50%.
Circular 22 takes effect from July 1, 2024./.
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