At the conference " Vietnam Commercial
Bank 2012-2013: Reform for survival" held in the morning April 26, Dr Le
Xuan Nghia, former vice chair of the National Financial Supervisory Committee
(NFSC) said that this year's expected money supply (M2) and credit growth would
be 15-17 percent.
However,
in the first four months of this year, the money supply grew only 1 percent and
the credit growth was negative 2.5 percent while the economic growth in Q1/2012
was only 4 percent, just enough to cover social security. These factors
suggested that the economy is under a severe recession, Nghia worried.
Nghia
forecasts if the government does not have timely adjustment policy, this year's
economic growth would be only about 5 percent, far lower than the expected
level of 6 percent set by the National Assembly.
According
to Nghia, to solve the issue, the most importance is to focus on rescuing the
capital sources that are frozen to tackle the economic recession. "This is
why it is necessary to accelerate restructuring the banking system" Nghia
said.
Nghia
shared the most dangerous period of banks is over. In the fourth quarter of
2011, banks suffered serious liquidity shortage and were on the risk of
disruption, but now the biggest risk is bad debts. As reported by banks, bad
debts ratio is now about 3.6 percent, estimated at more than 80 trillion dong
(while international organisations estimate this figure at about 12-13
percent).
According
to International Monetary Fund (IMF)'s estimates, the cost of restructuring the
banking system is about 5 percent of gross domestic product (GDP), or nearly
$5-6 billion. However, according to Nghia's calculations, it needs just about
$3-4 billion.
This
amount of money, Nghia said that, should be spent from the risk provision fund
of commercial banks, government bond issuance and other sources from the State
Bank of Vietnam (SBV).
Thoroughly
resolving bad debts is considered basic success in the restructuring process of
the banking system. The remaining stages such as innovating technology and
improving human resources depend on the resources of each bank" Nghia
said.
Meanwhile,
Nguyen Xuan Thanh, director of Fulbright economic masters programme, HCM City
pointed out, overlap ownership between banks causes banking regulations
completely disabled.
Currently,
the total chartered capital of 30 Vietnam's commercial banks reaches about 234
trillion dong, rising nine times from 2005 at 28.5 trillion dong. If seeing
this figure, it is very safe. However, it will be no longer safe due to the
overlap ownership mechanism.
According
to Thanh, presently banks own groups, groups own banks, banks own finance
companies and finance companies own groups. This phenomenon leads to the
lending activities basing on relationship and according to interest of groups
and will not ensure the efficiency. Meanwhile, efficiency is the leading target
of the restructuring process. Therefore, without determination in terms of
policy and lacking of coherent rules in determining the type of banks for
restructuring, the restructuring measures and the special control measures of
the central bank will be difficult to be performed.
"If
this overlap ownership mechanism still exists, it will be hard to successfully
restructure the banking system. Therefore, it is necessary to thoroughly deal
with the crossownership issue," Thanh recommended.
Pham
Manh Thuong deputy director general of Vietnam Debt and Asset Trading Corp
(DATC) suggested that establishing a bad debt fund to restructure is the most
effective.
HSBC's
deputy general director, Huynh Buu Quang, said that the central bank should
encourage foreign banks to participate in dealing bad debts. In foreign
countries, foreign banks are allowed to acquire up to 90-100 percent an ailing
bank and deal with bad debts. In Vietnam, as ruled, the maximum ownership of a
foreign bank in local banks is at only 20 percent, which is very difficult for
them to join, change and upgrade a weak credit institution.
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