Of the three main contents in Vietnam’s economic restructuring, banking sector keeps a special position; it requires an immediate and careful plan in order to avoid disruptions impacting the economy.
A day before the second session of the 13th National Assembly closed on November 26th 2011, National Assembly members showed deep concern about the financial - banking sector and its Restructuring plan in the questionnaire session to Mr Nguyen Van Binh - Governor of State Bank of Vietnam. He provided some important information about the detailed plan to restructure the commercial banking system.
Aiming to restructure the banking system, the Governor set up four objectives, which are: Cleaning up banking system/improving transparency; strengthening its competitiveness domestically and internationally; Restructuring banking system mechanisms to reasonably balance credit supply and provision of services for the economy. The last objective is to ensure that Vietnam’s banking system is in a healthy condition, as well as be able to integrate and compete actively with other countries. Restructuring will divide Vietnam’s banking system into three major groups, which are: Large-scale banks with healthy financial statement, small banks with healthy financial statement and banks in threat.
In the first group, big banks with healthy financial statement will be steered to become the backbone of commercial banking system in the future and strengthen their ability to compete regionally and internationally. By 2015, fifteen leading banks will keep about 80 percent of banking market share. One or two of them will reach regional and international stature.
The second group comprises small banks with healthy financial statement which do not need or are not able to develop further. State Bank of Vietnam will promulgate regulations to ensure controlled operation scale suitable for the credit institution’s capacity, as well as guarantee an operational segment where credit institutions can develop and operate safely and efficiently. The third group includes weak banks which must be restructured. State Bank of Vietnam will apply several solutions, such as: restructuring shareholders, strengthening shareholders’ capacity, or acquisition and merger with other credit institutions.
Accordingly, banks in threat will be fully and comprehensively restructured; probably acquired and merged with some big banks of the first group. Whereas, small banks with healthy financial statement will be directed to suitable market segment, therefore they must not improve and compete at all costs in urban areas.
This implementation itinerary is very urgent: In the period between the end of this year and the first quarter of the following year, the three groups of banking system will be clearly identified, and then liquidity problem in weak banks will be supported. From the second quarter of 2012 till the end of 2013, the restructuring of the second group will be completed. Following that is the process of improving safety and efficiency indicators, as well as applying international standards. By 2015, Vietnam will have banks with regional standards and its banking system will also be continuously restructured. It is expected that by 2020 Vietnam will have one or two credit institutions which could join the largest credit institutions in Southeast Asia.
Governor Nguyen Van Binh affirmed: “This process is implemented in order not to let any bank go bankrupt, ultimately ensuring the rights of depositors and banks’ clients.”
He also said: “One of our guidelines in the restructuring process is to improve internal strengths. Letting larger credit institutions with more healthy financial statement participate in the process of restructuring smaller ones will help save many costs.”
Determining the number of banks in the third group, those with weak financial statements and which must be restructured, is a difficult task. The list of banks has been rumoured for months. According to the Governor, those banks hold less than 5 percent of market share in the system. In the estimation of former Governor Cao Sy Kiem, the healthy condition of banks is in threat. There are currently dozens of banks which are in need of restructuring by M&A or dissolution.
Le Minh
Vietnamese
