Losses, wastefulness and wrong-doings in the banking sector have adversely impacted the profits of credit organizations but have not yet hurt their payment capacity or deposit security, the central bank’s governor said at the National Assembly hearings last Friday.
Among the many questions asked, was this question from deputy Dang Van Thanh of southern Can Tho province about the State Bank of Vietnam’s responsibility for the losses of hundreds of billions of Vietnamese dong at state commercial banks, including VND500 billion (US$31.28 million) at the Agriculture Bank alone.
Thuy attributed such losses to unfavorable conditions of the international forex market, and incompetence amongst creditors' staff and loose surveillance.
"As chief of the banking sector, I'm ready to bear full responsibility for these problems. All the cases involving monetary losses and wrong-doings have been inspected and violators have been strictly punished," said the governor.
Regarding the bad debts of the banking system, the governor explained that since the restructuring of commercial banks, bad debts have significantly been reduced to 2.8 per cent in 2004 from 14 per cent in 1997.
Since 2005 when the banking system started applying new loan categorization standards, the bad debt ratio recorded 3.15 per cent in 2005 and 3.5 per cent in the first six months of this year, said Thuy.
Answering questions about the risk hedging funds of credit organizations and the fact that they have not yet met requirements, Thuy said raising the risk provisioning ratio to 0.75 per cent in 2003 from 0.25 per cent has facilitate to promote the sustainability and efficiency of the banking sector. “The risk hedging funds have satisfied some 40 per cent of payment demand of bad debts,” Thuy explained.
The governor confirmed that with the current efforts, for the next three years, the risk provisioning fund of credit organizations would be sufficient to compensate for unrecoverable loans whereby the performance of the banking sector would be healthier and more efficient.
Given the efficiency of issuing polymer banknote, the governor confirmed that such issuing is designed to fight against counterfeit money in the market. “Through more than one year of circulation, it is proved that polymer banknote issued by Vietnam are as durable as those issued by other countries. The counterfeit rate in 2005 reduced by 40 per cent compared to 2004 and such a figure in the first half was down by a half compared to the same period last year. Amongst counterfeited banknotes, cotton bogus bills account for 96 per cent while polymer banknote makes up only 4 per cent,” Thuy pointed out.
While many deputies said that the cash payment ratio in Vietnam is very high, the governor asserted that this depends greatly on the common development level of the economy. “In recent years, this rate has gradually reduced. Namely, cash payments accounted for 31 per cent of money supply in 1997 but such a rate was down to 21 per cent in 2005 and the banking sector targets at lessening this ratio to 18 per cent in 2010 and 15 per cent in 2013,” Thuy answered.
Regarding the reality of the banking sector after Vietnam joins the World Trade Organization (WTO), Thuy said the post-WTO period would be “challenging”. Hence, he added, it is necessary to build a mechanism based on international standards to scale up capital and avoid risks.
Thanhniennews, Vneconomy
Vietnamese
