New policy promotes green banking development in Vietnam

New policy promotes green banking development in Vietnam (Photo: VNA)

Hanoi - The State Bank of Vietnam (SBV) is pushing all credit institutions to go green in terms of banking and credit.

They have issued a decision (Decision No 1663/QD-NHNN) aimed at making it easier to access green capital for green projects and the SBV requires all credit institutions to participate.

According to Nguyen Duc Lenh, Deputy Director of the SBV’s HCM City branch, under the decision, the requirement to develop green banking and green credit is not only the task of commercial banks but also the task of all credit institutions, including non-bank credit institutions including finance companies, financial leasing companies and people's credit funds.

“This helps to enhance responsibility and initiative of the entire credit institution system in developing green credit,” Lenh said.

More credit institutions are already implementing environmental and social risk management in their credit granting activities and are gradually approaching international standards in this activity. Therefore, the SBV's decision is a necessary step for the entire credit institution system to join them in promoting sustainable financing activities.

According to Tran Tuong Van, Consulting Director of EY Consulting Vietnam, banks are currently ready to lend green and are eager to find suitable customers.

However, in order to expand lending, credit institutions need to be reassured about concerns about green classification criteria and capital sources for green lending.

Therefore, the decision will create a unified legal basis for credit institutions to implement in practice as it regulates the SBV to periodically update the list of green projects and set out specific responsibilities for management agencies, such as issuing guidelines on green credit and environmental risk management, issuing guidelines for preparing reports on green credit and developing reference documents for credit institutions on green credit, environmental and social risk management.

In addition, experts believe as regulations on green credit and green bonds have been supplemented and specified in the Law on Environmental Protection and Decree No. 08/2022/ND-CP of the Government, the SBV's regulations on support mechanisms for credit institutions to encourage the development of green banking, such as considering prioritising capital sources for green credit development through refinancing and rediscounting policies; and supporting commercial banks with a high proportion of green credit loans in accessing capital sources from international organisations and development partners, will also help credit institutions boldly deploy new products such as large-scale green credit packages and green bond issuance activities.

Dr. Can Van Luc, chief economist at BIDV, said in order to have investment capital for green development sectors, Vietnam would need to mobilise about 368-380 billion USD by 2040, equivalent to 20 billion USD per year.

A complete legal framework would open up opportunities for the credit institution system to exploit the full potential in the green sector, especially creating initiative in persifying capital mobilised for the green sector, investing more deeply in designing green credit products and specific green bonds.

More incentives needed to support green credit: Experts Experts have shared a view that green credit and green growth play an important role in implementing the National Green Growth Strategy in the 2021-2030 period with a vision until 2050 as they create resources for environmentally-friendly projects and programmes.