Oct 22, 2012

Vietnam - Public awaits results of probe into banks

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VietNamNet Bridge – Publicising information and transparency in the banking system have hit the headlines recently and drawn lots of interest from the public. Truong Ngoc Anh, chief of the Banking Supervisory Agency's office under the State Bank of Viet Nam, talked to the Vietnam News Agency about the burning issue at a meeting in Ha Noi on Tuesday.

The publicity surrounding banking inspection has attracted significant public opinion in recent months. Will inspectors' conclusions about credit institutions soon be widely circulated?

Credit institutions are not only involved with enterprises but also operations related to everyone. Inspectors' conclusions will be partially publicised because certain points are confidential and could cause the entire banking system to collapse if made public. These are matters which need to be cautiously considered. For penal problems, the State Bank will have to wait for the procedures of investigation results from police. 

But the State Bank will widely announce appropriate information so that people can grasp the real situations facing banking operations. The bank is building a project on information publicity and transparency for the banking system, with a draft having been submitted for its Governor to report to the Prime Minister. The scheme is expected to be approved by the end of this year or in early 2013.

There has been speculation that some enterprises are the "backyards" of banks. What are your views?

No clear cases have been discovered so far, but inspectors have uncovered signs that some banks are pouring money into certain companies through many channels. The State Bank is carefully verifying the issue to have ascertain proper answer. We can't jump to conclusions on this.

While many enterprises struggle with declining profits, many banks still make significant sums of money. How do you explain this?

The difference between receipts and expenses for the whole banking system reached VND18.77 trillion (US$893.8 million) at the end of June and VND24.85 trillion ($1.18 billion) at the end of August. These figures look great but the level of return on equity (ROE), a ratio that indicates efficiency, is now insignificant at 0.4 per cent. We will have to wait until the end of the year when balances are concluded for an exact assessment. In previous years, banks have normally reached an ROE of 11-12 per cent.

Some lending institutions have high profitability rates with good risk management methods, but the general rate of the entire sector is now very low.

In recent months, the State Bank and commercial banks have offered many credit packages to finance enterprises.

However, many companies have said they couldn't obtain lending capital. Why?

Whether enterprises can access banks' capital sources depends on both sides. Banks must have available capital and companies asking for money must meet conditions stipulated by law.

At present, many firms complain that they find it hard to seek capital, but they don't qualify for borrowing. Credit institutions are always asked to strictly obey regulations in order to assure their own security as well as the banking system's sustainable development.

Banks' bad debts have mounted to tens of billions of dollars. Any unrecoverable debt will affect systematic security, thus, the State Bank must closely supervise this matter. In fact, some companies which lack qualifications can still receive bank loans. In this case, those who violate the laws must be responsible. For firms which fully meet required conditions but fail to borrow from banks, they should report to the State Bank so that necessary measures are taken.


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