Credit institutions that do not thoroughly
restructure will miss a precious opportunity to improve their competitiveness.
State
Bank Governor Nguyen Van Binh said that banking system restructuring is
something to be embraced with confidence in an interview on VIR.
What
are the initial results of banking system restructuring?
Basically,
the State Bank has been able to control weak banks’ performance through professional
measures. Thus, system risks are minimised, political stability and social
order have been maintained, and monetary market and credit activities are more
positive. Some commercial banks are merging on a voluntary basis, while
restructuring their finances, operations and corporate governance post-merger.
Many
weak banks are calling for investment from domestic and international investors
to increase their capital, address financial woes and renovate governance
systems. In the near future, there will be more voluntary mergers and
acquisitions under the State Bank’s strict supervision.
However,
it is still doubtful whether mergers are efficient as a merger of weaks banks
might give birth to a new weak bank. What is your opinion?
The
government and State Bank do not consider mergers as a finishing line or the
target of banking system restructuring. Mergers are just one of restructuring
measures and in many cases, they are the first step in the sequence of specific
measures to restructure banks.
The
restructuring must be processed comprehensively in finance, operations and
governance by both healthy and weak credit institutions. The roadmap must be
suitable with each credit institution’s characteristics and in line with the
2011-2015 banking system restructuring plan approved by the prime minister.
All
banks are required to develop and report restructuring plans to the State Bank
and their restructuring process will be supervised by the State Bank.
Therefore, after a merger, banks must implement specific measures to
restructure finances, operations and governance to ensure they meet safety
standards.
Principles
for handling weak banks include ensuring payment capability, then applying
suitable control and supervision measures, conducting voluntary or obligatory
mergers, and then restructuring those banks’ finances, operations and
governance.
What
will the State Bank do to improve bank governance quality after restructuring?
The
first thing is to increase the transparency in banking operations through
applying new information disclosure mechanisms, boosting commercial banks’
stock market listing and increasing the publicity of commercial banks.
Secondly,
state-owned corporations and groups that are shareholders in the banks must divest
and terminate their non-core investment in the banking sector. Thirdly, limit
the control and manipulation of the major shareholders in commercial banks,
seriously punish major shareholders violating the limit of ownership at
commercial banks and punish credit institutions that have illegal cross
ownership.
Fourthly,
heighten the criteria on governance capacity, work experience and
qualifications of credit institutions’ leaders and key managers. Fifthly,
implement healthy internal business policies, apply effectively advanced
management methods and develop risk management systems in accordance with
international standards and principles. Of which, banks should focus on
controlling liquidity, credit, market and operational risks.
By
2015, the Basel II standards will be applied in Vietnam’s banking system. Banks
must develop internal credit rating systems, classify loans and provisions for
risks in accordance with international principles and credit risk levels,
improve credit assessment capacity as well as internal control and audit
systems.
To
ensure a strong banking system, what are the State Bank’s recommendations to
local banks?
Commercial
banks should be aware that the safety and efficiency of their activities are
the responsibility of banks’ owners and board of directors. Currently, the
banking industry is being offered great opportunity for further development,
but also faces many internal weaknesses and external challenges.
Restructuring
should be viewed as an opportunity to help banks overcome the difficulties and
develop a foundation to ensure that banks operate more safely, effectively and
efficiently.
Therefore,
stepping up restructuring is a strategic task and urgent requirement for each
credit institution until 2015. Credit institutions that do not implement
restructuring seriously and thoroughly will miss a great opportunity to improve
their competitiveness.
The
State Bank is ready to apply interventions, including mandatory tough measures
to protect the interests of the people and country, ensuring the safety of
credit institution system. The State Bank will strictly deal with weak banks
that threaten the safety of the credit institution system.
VIR
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