The
liquidity of the banking system will remain the biggest and most serious
challenge for Vietnam’s macro-economy in 2012, said Vice Chairman Le Xuan Nghia
of the National Commission for Financial Supervision.
Speaking at the seminar on Vietnam’s economic
outlook in 2012-2013 held in Hanoi on Monday, Nghia said several banks had
recently pushed up their deposit interest rates to 19-20%, or even 21%,
regardless of the regulatory ceiling of 14%. Such phenomena revealed liquidity
problems at several banks, he said.
In addition, the liquidity situation also
becomes tense in the primary market, as the banks are boosting internal
lending, said Nghia. Lenders are opening both loan and deposit accounts that
are worth as much as 500 trillion dong combined, as calculated by the
commission.
“The monetary and banking market will continue
to face difficulties in liquidity and bad debts in the first months of 2012.
Liquidity is the greatest challenge for the banking system,” he said.
He advised the banking system should draw
lessons from the South American countries which failed to curb inflation after
two years of global economic crisis.
“As their confidence is severely eroded,
customers hesitate to deposit money, switching to investment in gold and
foreign currencies. Lenders are unwilling to give out loans after the nightmare
of property market, while borrowers are discouraged by high interest rates,” he
warned of the current situation in Vietnam.
The commission’s report showed there are more
potential risks in the banking system’s liquidity, given the recent upheavals
in the inter-bank market. For the first time in history, mortgages are required
for inter-bank borrowing, while the bad debt ratio continues to surge
The system’s asset quality is worsened by high
credit growth while risk management is still limited and shortcomings remain in
operating monetary and interest rate policy, according to Nghia.
In particular, bad debts of the entire banking
system have risen to the current level of 85 trillion dong from 71.6 trillion
dong as of last year’s second quarter. The average growth of bad debts in the
first half of 2011 is 7.3%, twice as much as the monthly average of 2010.
The ratio of bad debts on total outstanding
loans has surged to 2.88% as of end-June 2011, and recently jumped to 3.39%.
However, the increase in provisions for credit
risks does not match that in bad debts. The ratio of risk provisions over bad
debts is on the downtrend, falling from 81.1% in late 2010 to 67.1% as of
end-June 2011.
Also, the capital adequacy ratio (CAR) tends
to drop strongly, with more banks failing to satisfy the regulated CAR. As of
end-June last year, two out of 47 banks failed to meet the regulated CAR, but
in the end of the third quarter, the figure rose to 17 out of 42 banks.
Saigon Times
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