The State Bank of Vietnam (SBV) is on the right track with its effort torestructure the banking system, deputy head of the Central Institutefor Economic Management Vo Tri Thanh told Nhan Dan (People) newspaper ina recent interview.
*What is your evaluation of the banking system restructuring process over the past time?
Restructuringthe banking system is a complex job in terms of institutions andresources for implementation, given the need to restore and maintainmacroeconomic stability as well as the effort to reform and push forgreater international integration. Therefore, it requires not only thedetermination and responsibility of the banking sector but alsoco-ordination and consensus from other ministries and agencies.
Restructuringthe banking system includes altering many closely linked aspects - fromcommunications, information disclosure, enhancement of financialoversight capacity, enhancement of management quality (especially riskmanagement and adoption of international practices) to the restructuringof State-owned commercial banks, joint stock commercial banks,financial companies, financial leasing companies, foreign banks andpeople’s credit funds.
Over the past time, the banking sector hasbeen proactive in implementing the restructuring plan of creditinstitutions during the 2011 - 2015 period. Although more efforts areneeded to carry on with the job, the impressive thing over the past twoyears is that the SBV has basically achieved the goal of systemstability.
Mergers and acquisitions have made a number of banksperform better, prevented market instability and built confidence in theGovernment’s determination to stabilise the macro-economy.
*However, some hold the opinion that the banking system restructuring process was too slow. What do you think about this view?
AsI said above, restructuring the banking system involves a mountain ofcomplex tasks due to its relation to macro-economic stability, theentire economic restructuring process and its wide-ranging impact onsocio-economic life. That can be seen in other countries in the world,no matter if they are developing or developed economies.
Onemore thing that needs to be taken into consideration is the resourcesfor the restructuring of the overall economy and the banking system inparticular. In some countries, State funds are provided to supportbanking system restructuring, but in Vietnam, State funds are not to beused on principle. And every restructuring effort should go inaccordance with this principle.
Moreover, a reverse effectshould also be taken into account if restructuring is implemented tooaggressively, especially when it is not in sync with restructuring inother areas. Otherwise, it may cause instability in the system or makerestructured banks fail to perform. A weak bank is similar to a weakbody and requires the appropriate amount of medicine and a treatmentregimen.
Saying that does not mean that we are hiding the truth,but that we can work out an appropriate measure with the highestconsensus to implement the restructuring successfully. There wereunexpected complications when the policy was shifted from stabilising torestructuring the economy in early 2011. But in general, the bankingrestructuring process has been implemented proactively and has followedclosely the plan approved by the prime minister. And I think from itsexperience, the SBV has been able to identify moderate amounts ofremedies to realise the three goals in restructuring the banking system,namely making the system healthier, ensuring the stability of thesystem and not using State funds.
There are two big lessons here.First, during the implementation of the restructuring plan, we need tomake a timely summing-up of experience and institutional obstacles sothat appropriate solutions can be worked out. And second, there shouldbe synchronous co-ordination between relevant agencies, especially thosein charge of restructuring State-owned enterprises, public investmentand the banking sector.
*Regarding bad debt resolution, some saythat there are still many difficulties, as bad debt is only classifiedbut has not yet been radically resolved. What is your opinion?
Whetherwe want or not, resolving bad debt is part of the banking systemrestructuring process. A rapid resolution of bad debt would have apositive impact on both economic recovery and restructuring. However,given limited resources and an incomplete legal framework, theestablishment of the Vietnam Asset Management Company (VAMC) was anappropriate choice. In order to expedite bad debt resolution, we need toenhance the capacity of the VAMC, create essential conditions for theoperation of a debt trading market and perfect the legal framework ofthe property market.
So resolving bad debt is the task not onlyof the State Bank of Vietnam, despite its crucial role, but also ofrelevant ministries and agencies. A prime example is the relationshipbetween resolving bad debt and legal issues on ownership andtransactions on the property market. It also has a close relation to theeconomy’s ability to recover in general. In my opinion, the SBV, withinits mandate, has made a great effort to introduce many measures toresolve bad debt, including the establishment of the VAMC and building amechanism for its operation.
Challenges remain; resolving baddebt requires time and an appropriate roadmap. But I hope that the SBVcan handle the bad debt problem in a more rapid and effective manner aslong as the fundamental conditions for resolving bad debt are laid downin a timely manner.
*In order to accelerate the progress of banking system restructuring, which solutions should we focus on?
TheSBV has achieved positive results in the restructuring of the bankingsystem and has learned many useful lessons, though challenges remainahead. The key thing is that the SBV remains steadfast in its goal ofensuring the stability of the banking system in order to buildconfidence in the market and the people. Confidence in the bankingsystem is also bolstered by other factors including macro-economicstability, gold and currency management, and the balance of payment.
Anotherkey thing is that the banking sector should continue its effort toresolve bad debt and restructure itself. In addition, in a world ofturbulence, the sector needs to keep a close watch on the consequencesarising from different shocks so that appropriate measures andadjustments can be made.-VNA
*What is your evaluation of the banking system restructuring process over the past time?
Restructuringthe banking system is a complex job in terms of institutions andresources for implementation, given the need to restore and maintainmacroeconomic stability as well as the effort to reform and push forgreater international integration. Therefore, it requires not only thedetermination and responsibility of the banking sector but alsoco-ordination and consensus from other ministries and agencies.
Restructuringthe banking system includes altering many closely linked aspects - fromcommunications, information disclosure, enhancement of financialoversight capacity, enhancement of management quality (especially riskmanagement and adoption of international practices) to the restructuringof State-owned commercial banks, joint stock commercial banks,financial companies, financial leasing companies, foreign banks andpeople’s credit funds.
Over the past time, the banking sector hasbeen proactive in implementing the restructuring plan of creditinstitutions during the 2011 - 2015 period. Although more efforts areneeded to carry on with the job, the impressive thing over the past twoyears is that the SBV has basically achieved the goal of systemstability.
Mergers and acquisitions have made a number of banksperform better, prevented market instability and built confidence in theGovernment’s determination to stabilise the macro-economy.
*However, some hold the opinion that the banking system restructuring process was too slow. What do you think about this view?
AsI said above, restructuring the banking system involves a mountain ofcomplex tasks due to its relation to macro-economic stability, theentire economic restructuring process and its wide-ranging impact onsocio-economic life. That can be seen in other countries in the world,no matter if they are developing or developed economies.
Onemore thing that needs to be taken into consideration is the resourcesfor the restructuring of the overall economy and the banking system inparticular. In some countries, State funds are provided to supportbanking system restructuring, but in Vietnam, State funds are not to beused on principle. And every restructuring effort should go inaccordance with this principle.
Moreover, a reverse effectshould also be taken into account if restructuring is implemented tooaggressively, especially when it is not in sync with restructuring inother areas. Otherwise, it may cause instability in the system or makerestructured banks fail to perform. A weak bank is similar to a weakbody and requires the appropriate amount of medicine and a treatmentregimen.
Saying that does not mean that we are hiding the truth,but that we can work out an appropriate measure with the highestconsensus to implement the restructuring successfully. There wereunexpected complications when the policy was shifted from stabilising torestructuring the economy in early 2011. But in general, the bankingrestructuring process has been implemented proactively and has followedclosely the plan approved by the prime minister. And I think from itsexperience, the SBV has been able to identify moderate amounts ofremedies to realise the three goals in restructuring the banking system,namely making the system healthier, ensuring the stability of thesystem and not using State funds.
There are two big lessons here.First, during the implementation of the restructuring plan, we need tomake a timely summing-up of experience and institutional obstacles sothat appropriate solutions can be worked out. And second, there shouldbe synchronous co-ordination between relevant agencies, especially thosein charge of restructuring State-owned enterprises, public investmentand the banking sector.
*Regarding bad debt resolution, some saythat there are still many difficulties, as bad debt is only classifiedbut has not yet been radically resolved. What is your opinion?
Whetherwe want or not, resolving bad debt is part of the banking systemrestructuring process. A rapid resolution of bad debt would have apositive impact on both economic recovery and restructuring. However,given limited resources and an incomplete legal framework, theestablishment of the Vietnam Asset Management Company (VAMC) was anappropriate choice. In order to expedite bad debt resolution, we need toenhance the capacity of the VAMC, create essential conditions for theoperation of a debt trading market and perfect the legal framework ofthe property market.
So resolving bad debt is the task not onlyof the State Bank of Vietnam, despite its crucial role, but also ofrelevant ministries and agencies. A prime example is the relationshipbetween resolving bad debt and legal issues on ownership andtransactions on the property market. It also has a close relation to theeconomy’s ability to recover in general. In my opinion, the SBV, withinits mandate, has made a great effort to introduce many measures toresolve bad debt, including the establishment of the VAMC and building amechanism for its operation.
Challenges remain; resolving baddebt requires time and an appropriate roadmap. But I hope that the SBVcan handle the bad debt problem in a more rapid and effective manner aslong as the fundamental conditions for resolving bad debt are laid downin a timely manner.
*In order to accelerate the progress of banking system restructuring, which solutions should we focus on?
TheSBV has achieved positive results in the restructuring of the bankingsystem and has learned many useful lessons, though challenges remainahead. The key thing is that the SBV remains steadfast in its goal ofensuring the stability of the banking system in order to buildconfidence in the market and the people. Confidence in the bankingsystem is also bolstered by other factors including macro-economicstability, gold and currency management, and the balance of payment.
Anotherkey thing is that the banking sector should continue its effort toresolve bad debt and restructure itself. In addition, in a world ofturbulence, the sector needs to keep a close watch on the consequencesarising from different shocks so that appropriate measures andadjustments can be made.-VNA
