Governor of the State Bank of Vietnam (SBV) Nguyen Van Binh has saidthat he would continue monitoring credit institutions in the comingmonths.
The Governor delivered the message in response toconcerns from National Assembly deputies about the next stage of therestructuring process of the nation's financial system, considered oneof three pillars of the economic reforms unveiled in late 2012.
Thetwo other pillars are public investment and state-owned enterprises. Ifthe deep-seated diseases in the banking system are not properlyresolved, the progress of the entire economic reform might face longdelays, said officials.
NA deputy Tran Hoang Ngan from Ho ChiMinh City, along with NA deputy Tran Ngoc Vinh from Hai Phong city, saidthat the process of restructuring commercial banks signalled positiveresults, including the handling of bad debt.
"At the first stage, those [merger and acquisitions, and restructuring] have helped banks get back on track," said Vinh.
Accordingto the central bank, the safety level of the nation's banks hasimproved. Further, restructuring has reduced the number of banks byseven. Banks now are likely to be more competent after withdrawingcapital from non-core businesses.
Governor Binh said that hewould carefully watch credit institutions that have received approvalsfor their restructuring plans, to assure their plans are completed ontime or to handle emerging issues in the time before 2015.
Thebanking restructuring plan, initiated last April in a move to improvethe resilience of the money system, will move ahead to improve both thesize and quality of banks' equity and to eliminate businesses with smallprofits.
The vulnerable banking system had been on the verge of acrisis following many years of excessive credit growth and easy lendingto State corporations, along with cross-shareholding issues.
As astep in creating a more transparent and healthy money system, thenewly-amended law on bankruptcy now makes it legal for creditinstitutions to declare bankruptcy.
The amended law, which waspassed by the National Assembly last week, will come into effect onJanuary 1 next year. The Law on Bankruptcy, issued in 2004, did notapply to credit institutions, while the amendment for creditinstitutions was made after the State Bank of Vietnam had pinpointednine weak credit institutions and had them restructured, merged withother banks or even acquired by new owners.
Once the central bankstops special controls and recovery measures at a credit institution, agroup of shareholders, who own 20 percent or more of a general stake atthe credit institution, has rights and obligations to initiate legalactions to allow the institution to declare bankruptcy.
Creditinstitutions also have obligations to submit inquiries for bankruptcywhen it is necessary. If credit institutions do not do so, the centralbank will move for the institutions being declared bankrupt.
Assetclassification will follow in the order of importance: as they must payexpenses, salaries, job-leave allowances, insurance and other benefitsof labourers subject to agreed contracts, deposits, and other financialobligations.
Cao Sy Kiem, Small and Medium-size EnterprisesAssociation's Chairman, said that bankruptcies will be a welcome andunavoidable move.
For not permitting credit institutions todeclare bankruptcy had resulted in low accountability among bankers andbelow-standard transparency in the banking system.
Since 1975 there were no credit institutions in Vietnam that made a public declaration of bankruptcy.
Thereis also a popular belief that the State and the Government haveconnections with credit institutions that ensure banks never gobankrupt. In fact, ‘silent' bankruptcies were allowed during the 1990sbanking crisis, which reduced the number of commercial banks from 51 in1997 to 39 in 2001.
Experts have said it is time to change thepublic belief that banks have problems and declare bankruptcy, likeother enterprises, and follow international standards in administeringtheir banking system.-VNA
The Governor delivered the message in response toconcerns from National Assembly deputies about the next stage of therestructuring process of the nation's financial system, considered oneof three pillars of the economic reforms unveiled in late 2012.
Thetwo other pillars are public investment and state-owned enterprises. Ifthe deep-seated diseases in the banking system are not properlyresolved, the progress of the entire economic reform might face longdelays, said officials.
NA deputy Tran Hoang Ngan from Ho ChiMinh City, along with NA deputy Tran Ngoc Vinh from Hai Phong city, saidthat the process of restructuring commercial banks signalled positiveresults, including the handling of bad debt.
"At the first stage, those [merger and acquisitions, and restructuring] have helped banks get back on track," said Vinh.
Accordingto the central bank, the safety level of the nation's banks hasimproved. Further, restructuring has reduced the number of banks byseven. Banks now are likely to be more competent after withdrawingcapital from non-core businesses.
Governor Binh said that hewould carefully watch credit institutions that have received approvalsfor their restructuring plans, to assure their plans are completed ontime or to handle emerging issues in the time before 2015.
Thebanking restructuring plan, initiated last April in a move to improvethe resilience of the money system, will move ahead to improve both thesize and quality of banks' equity and to eliminate businesses with smallprofits.
The vulnerable banking system had been on the verge of acrisis following many years of excessive credit growth and easy lendingto State corporations, along with cross-shareholding issues.
As astep in creating a more transparent and healthy money system, thenewly-amended law on bankruptcy now makes it legal for creditinstitutions to declare bankruptcy.
The amended law, which waspassed by the National Assembly last week, will come into effect onJanuary 1 next year. The Law on Bankruptcy, issued in 2004, did notapply to credit institutions, while the amendment for creditinstitutions was made after the State Bank of Vietnam had pinpointednine weak credit institutions and had them restructured, merged withother banks or even acquired by new owners.
Once the central bankstops special controls and recovery measures at a credit institution, agroup of shareholders, who own 20 percent or more of a general stake atthe credit institution, has rights and obligations to initiate legalactions to allow the institution to declare bankruptcy.
Creditinstitutions also have obligations to submit inquiries for bankruptcywhen it is necessary. If credit institutions do not do so, the centralbank will move for the institutions being declared bankrupt.
Assetclassification will follow in the order of importance: as they must payexpenses, salaries, job-leave allowances, insurance and other benefitsof labourers subject to agreed contracts, deposits, and other financialobligations.
Cao Sy Kiem, Small and Medium-size EnterprisesAssociation's Chairman, said that bankruptcies will be a welcome andunavoidable move.
For not permitting credit institutions todeclare bankruptcy had resulted in low accountability among bankers andbelow-standard transparency in the banking system.
Since 1975 there were no credit institutions in Vietnam that made a public declaration of bankruptcy.
Thereis also a popular belief that the State and the Government haveconnections with credit institutions that ensure banks never gobankrupt. In fact, ‘silent' bankruptcies were allowed during the 1990sbanking crisis, which reduced the number of commercial banks from 51 in1997 to 39 in 2001.
Experts have said it is time to change thepublic belief that banks have problems and declare bankruptcy, likeother enterprises, and follow international standards in administeringtheir banking system.-VNA
