The State Bank of Vietnam has released a draft circular regulating consumer credit activities of financial companies to better manage lending as well as benefit domestic consumers. Under the draft, commercial banks are required to establish financial companies if they want to venture into consumer lending. Currently, commercial banks can provide loans to consumers, which is considered to be a high-risk venture. Since consumer lending was managed separately from other lending services of commercial banks, the central bank expected it would help the consumer lending market to develop more transparency, and develop in a healthy and effective manner, in accordance with international rules. Specialising in consumer lending will help commercial banks better enhance risk supervision and management, it said. Besides, banking expert Huynh Trung Minh said the growing number of finance companies would help reduce interest rates on consumer loans and improve the service quality of lending. Commercial banks also said that the transfer of consumer lending from commercial banks to financial companies would help the banks a lot as they could exploit thoroughly the potential retail market, diversify services as well as improve its risk management. Senior finance expert Can Van Luc told the Dau tu (Vietnam Investment Review) newspaper that consumer lending accounted for just 6 percent of the total outstanding loans in Vietnam. Meanwhile, this rate was 15 to 20 percent in many other countries, and as high as 35 to 40 percent in the United States market. The merger and acquisition (M&A) with banks, will also help financial companies as they can benefit from capital mobilisation of banks and the market share as well as all their technology, infrastructure and human resources. Experts said the move for M&As between banks and financial companies, or establishment of new financial companies, would become a major trend this year to help banks meet the SBV's regulations and boost consumer lending. In the first half of this year, Techcombank, Maritime Bank and VP Bank bought Vietnam Chemical Finance JSC (VCFC), Textile Finance JSC (TFC) and Vietnam Coal and Mineral Industries Financial Company, respectively, while the HCM City Housing Development Joint Stock Bank (HDBank) and the Japanese Credit Saison Company Ltd also formed the HD Saison Finance. Many other banks such as Vietinbank, BIDV, and Vietcombank, along with Sacombank and ACB are also planning to set up financial companies or acquiring financial companies through M&As.-VNA