Foreign banks will be encouraged to compete equally as well as boostbusiness co-operation with domestic credit organisations, under a planadopted by Prime Minister Nguyen Tan Dung last week.
The schemefor restructuring the banking system through 2015 would call for theforging of close links between local and foreign institutions to helpdevelop products, improve governance and modernise technology.
Foreignownership ratios would be increased, particularly for weakerjoint-stock commercial banks. Foreign institutions will be encouraged tocontribute capital and buy stakes in weaker domestic entities, whileparent institutions overseas would be asked to guarantee the paymentcapacity of affiliates in Vietnam.
Domestic commercial banks andfinance companies would therefore be classified into three groups –healthy, temporarily short of liquidity, and fragile – in order forauthorities to approve suitable measures, such as reorganisation, mergeror acquisition, reform of risk management systems, and the interferenceof the State Bank of Vietnam or other agencies.
Dung has alsotasked the Ministry of Finance to co-operate with the State Bank ofVietnam to develop a plan to deal with the bad debts of creditinstitutions, as well as plan needed increases in charter capital byState-run commercial banks through 2015. The State Bank last monthallocated varying credit growth quotas for this year to four groups ofbanks based on their health and performance.
Dung said State-owned commercial banks would also play an important role in the restructuring of the banking system.
"Theyshould be the driving force in the banking system, with large scale,safe and efficient operations, advanced management capacity, and thecapability to compete domestically and internationally," Dung said.
Dungurged State-owned banks to implement comprehensive restructuring byhastening equitisation, improving asset quality, expanding transactionnetworks, diversifying capital sources and controlling credit quality.They should target a bad debt ratio of below 3 percent and graduallyreduce outstanding loan ratios to no more than 90 percent of deposits,he said.
By 2015, there would be then be one or two State-runbanks which would rise to a regional level in terms of scale,management, technology and competitive capacity.
"They should beflagship institutions in investing in key sectors of the economy such asinfrastructure, export, agriculture, rural areas, production, and small– and medium-sized enterprises," Dung said.-VNA