SBV’s attempt to tighten financial leasing operation faces opposition

Published: 19/05/2011 05:00



VietNamNet Bridge – The draft decree on the operation of financial leasing companies has been facing strong opposition from financial leasing companies which believe that the draft decree has “unreasonable provisions”.

On May 4, the State Bank of Vietnam (SBV) made public the draft decree on the operation of financial leasing and finance companies, with the new provisions aiming to tighten the control over the companies.

The draft decree says that financial leasing companies must have at least one year of operation in order to be eligible for mobilizing more-than-one-year term capital, by issuing deposit certificates or bonds. The companies must have the ratio of pretax profit on stockholder equity of at least 10 percent (the stockholder equity of the year preceding the year of issuance). Especially, before issuing bonds or deposit certificates, the non-performing loans (NPL) ratio must be less than three percent.

The draft decree also says that the assets to lease of financial leasing companies must be machines or equipment (but not the entire lines of equipment or production lines), transport vehicles (but not ships, trains, aircraft, oil rigs) and other movable properties.

The policy makers said that for a long time, financial leasing companies have not complied with the requirements on the nature of the leased assets. Therefore, it is now necessary to set a limitation on the kinds of assets financial leasing companies can lease, in order to minimize risks in the financial leasing and make it suitable to the international practice.

However, financial leasing companies do not think this way. Dam Duc Long, Secretary General of the Vietnam Financial Leasing Association, said that prohibiting leasing ships is an reasonable regulation.

Long thinks that the State Bank tries to prohibit to lease ships after noting that the bad debts of some financial leasing companies have aroused from ship leasing.

“The risks incurred by the financial leasing companies should be understood as the bad corporate governance of the companies, not because of the nature of the ship leasing activity,” Long said.

Sharing the same view, other enterprises said financial leasing is a type of leasing assets, where most of the risks are on the leasee’s side; therefore, it is not necessary to restrict the kinds of assets to be leased.

Hoang Gia Hiep, Director of Vinashin Financial Leasing Company, which has advantages in leasing ships, commented that it is groundless to set up restrictions on the kinds of assets to be leased. “Leasing aircrafts, ships, floating stores or oil rigs are very popular in the world,” Hiep said.

Regarding the capital mobilization of financial leasing companies, Long said that the attempting regulations have made financial companies disappointed because they are unreasonable and unpractical.

The policy makers, reasoning the article in the 1997 Law on Credit Institutions, say that financial leasing companies are only allowed to mobilize capital with the terms of more than one year. Meanwhile, financial leasing companies, citing the 2010 Law on Credit Institutions, say that they are allowed to receive fixed term deposits from institutions.

“If policy makers refer to the old law, then why is it necessary to enact a new law?” a businessman questioned.

Another attempting issue that has raised arguments is that under the draft document, financial leasing companies will have to issue debt instruments, while they are not allowed to accept deposits from individuals and institutions.

Meanwhile, according to Hiep, in Vietnam, the capital market has not been developed, including the markets of bonds or normal debt instruments, let alone derivatives market.

C. V

Provide by Vietnam Travel

SBV’s attempt to tighten financial leasing operation faces opposition - Business - News |  vietnam travel company

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