(VEN) – Restructuring and challenges for credit institutions in building their managerial capacity were major concerns addressed by economic and financial experts at the Macro Economy Move and Commercial Bank Restructuring Prospect workshop held recently in Hanoi.
Credit institutions had become more active in setting up contingency funds, dealing with bad debts
Great challenges remain
As a result of tough restructuring measures, the commercial banking system ensured their liquidity; the inter-bank interest rate was stable; nine weak credit institutions had been reformed; the deposit market was put in order; businesses faced less difficulties than before due to the rapidly-reduced interest rate; and credit institutions had become more active in setting up contingency funds, dealing with bad debts (amounting to VND86.3 trillion worth of contingency funds in 2012 and the first seven months of this year), applying international standards (Basel II) and increasing the business safety index.
However, Bank for Investment and Development of Vietnam (BIDV) Deputy General Director Tran Phuong said that banks still faced major challenges, particularly those associated with bad debts and managerial capacity building. Reports from credit institutions showed that bad debts as a percentage of all debts remained high at 4.58 percent by the end of this July, a 0.28 percent increase from the beginning of the year. Meanwhile, banks did not meet international standards on the transparency of their bad debt reports. An itinerary was outlined for completing bad debts by 2014. However, this target is challenging due to insufficient management solutions and financial resources.
Tran Phuong also said that apart from bad debts, cross-ownership among banks was complicated, while bank managerial capacity and business borrower solvency remained weak, creating great challenges for restructuring commercial banks.
Taking comprehensive measures
The project to restructure commercial banks from 2011-2015 aims to complete financial bad debt resolution by 2014, while completing operational and managerial restructuring by 2015. For this to happen, comprehensive measures are necessary to resolve bad debts and build business and risk management capacity.
National Financial Supervisory Commission (NFSC) former Deputy Chairman Dr. Le Xuan Nghia said that more unanimity was needed to resolve bad debts. He also said that trust needed to be built between businesses and banks, which were expected to sell their bad debts, and raised more financial resources for the Vietnam Asset Management Company (VAMC) to make it more able to resolve bad debts. It is also needed to apply more specific mechanisms on the VAMC’s credit underwriting via simple procedures to effectively restructure businesses. It is also important to boost administrative reforms, including the VAMC’s procedures for asset transfer and transformation. Incentives should be given to the debt market in terms of tax preferences and asset ownership by or asset lease to foreigners.
In addition, it is vital to strengthen inspection and monitoring of the transparency of the banks, including debt resolution (in terms of accounting, financial reporting, credit and debt agreements, and banking system safety), while effectively resolving problems related to shareholder ownership and benefits, urging commercial banks to draw up their business strategies based on new accounting and safety standards, and completing the management information system and remote monitoring requirements.
It is also needed to carry out comprehensive investigations of bank ownership structures, set up an itinerary for completely resolving the existing cross-ownership and dominant ownership among banks, closely control credit and corporate bonds related to bank capital contribution, and apply serious sanctions of violations. /.
By Lan Ngoc
Đăng ký: VietNam News