Opening the question and answer session on the afternoon of November 24, deputy Nguyen Van Tuyet asked the governor about the number of weak banks that need to be strictly supervised and the banking restructuring plan.
Deputy Dang Thi Hoang Yen questioned Binh about the SBV’s measures to deal with black credit, which sources from SBV’s tightening of banking credit.
Deputy Tran Ngoc Vinh said that the governor had committed to cut down lending interest rate but many enterprises have to borrow capital at high interest rates. The central bank set the ceiling deposit interest rate at 14 percent per year, which does not benefit banks nor enterprises but bankers. “How will the SBV solve this matter?” Vinh asked.
About banking restructure, governor Binh said deputies should understand this process properly. It is necessary to restructure banks because the economy has entered a new period and the financial system needs to develop more strongly, not because banks are weak. In comparison with other countries in the world, Vietnam’s banking system still stands firmly in crisis, Binh affirmed.
He said weak banks account for around 5 percent (8 banks), mainly small joint stock banks. Binh cited a deputy who had said that restructuring banks is likely spraying pesticide: pests must die and trees must be alive. Binh added: “I see banking restructuring like throwing rats but not breaking the vase”. However, he said the banking restructuring plan could not be made public right now.
The governor said it is not true that Vietnam has abundance of banks but abundance of small credit institutions that operate unhealthily. According to the Organisation for Economic Cooperation and Development (OECD), each 1,000 residents need one banking transaction points. This rate is still low in Vietnam.
Binh said the short-term goal of banking restructure is building two local banks which are capable to compete in the region and 10-15 others that are big enough to be the pillars of the economy. Other credit institutions may be accepted but they must operate healthily. The SBV will be interested in developing micro financial institutions to enable all people to have access to banking services.
Binh explained that the SBV maintains the ceiling deposit interest rate at 14 percent per year because this rate was designed at the end of 2010, when inflation was forecast to be 7 percent in 2011.
He said the rate was inappropriate to the situation in the January-August period of 2011 when inflation far exceeded the forecast inflation but since August 2011, the 14 percent rate is suitable because the targeted inflation rate for 2012 is one-digit number.
He admitted that some enterprises are difficult to approach capital but the main reason is their weak financial ability and solvency.
Binh also received tens of questions about capital for enterprises in 2012, management of the gold market, dealing with bad debts and banking restructuring orientation. The governor will answer these questions today, November 25.
PV
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