Mergers and acquisitions (M&A) within the Vietnamese banking industry have contributed to the sector's restructuring in recent years, but experts are suggesting that big banks get involved in the process.

Truong Thanh Duc, Chairman of the Vietnam Banking Association's Legal Club, said banking reform in the past two years has yet to provide the expected outcomes.

Eight or nine weak banks were approved for restructuring through mergers with other banks, but their merger plans are viewed as temporary and not the optimum solution, given their weak performance following the mergers.

Banking system indicators which reflect financial strength, including capital adequacy ratio, non-performing loans, risk management system and corporate governance, have not improved greatly compared with those recorded 10 years ago.

Duc said big banks' involvement in M&A with weak banks would help raise the quality of restructured banks, but added that this process be done voluntarily.

He also proposed that banks found to be too weak for restructuring be allowed to go bankrupt or be dissolved while the stronger banks be restructured to serve various customer groups.

The Thoi Bao Kinh Te Vietnam newspaper (Vietnam Economic Times) also quoted Duc as saying: "It's important to have good management and supervision policies to ensure the safe and effective operation of the banking system."

Nguyen Tri Hieu, a banking expert, expressed worries that M&A involving the biggest banks could reduce competitiveness in the market, as these banks could use their strong financial capacity, as well as preferential Government policies and dominating market position, to squeeze smaller banks.

However, Hieu also agreed that the participation of big banks in M&A would bring better results for small banks and benefit the entire system.

In the first half of this year, numerous banks revealed their M&A plans, including small banks such as Southern Bank, DongA Bank, PG Bank, and VietA Bank, as well as big banks such as Sacombank and Eximbank.

The central bank expects to reduce the number of banks to about 20 to 25 by speeding up the restructuring process with more M&A deals next year.-VNA