While the state bank vowed to take drastic measures to restructure the banking sector, the task is turning out to be more difficult than originally expected, said an economist.
Reducing number of banks hoped to add strengh to the economy
There are plans to deal with eight weak credit institutions this year and mergers and acquisitions will be accelerated, as the number of banks is planned to be reduced from 39 to 15 by 2017. However, economist Bui Kien Thanh says that things may not go exactly according to plan.
Do you think that the five-year plan to restructure the banking sector is viable?
Time is not the issue. Mergers will still occur but acquiring a bank is another matter. Spending VND3 trillion (USD143 million) to buy a bank may not be a problem, but how the buyer plans to deal with VND30 trillion of bad debt that comes along with it may be.
Currently, at many banks the amount of bad debt is greater than charter capital, so the the funds devoted to merges and risk prevention funds will be considerable. I think we should follow the law. In the US, for example, they let banks go bankrupt. It is unique to Vietnam to not allow banks to do so. Weak banks should be weeded out just like companies in any other sector.
We fear runs on banks, but when people withdraw their money, they will likely deposit it into other banks. We also fear that if deposit interest rates dip lower than inflation it could cause a run on banks, but I think this is nonsense. Where else are the people supposed to keep their money? If there are some people who buy gold, there must also be people who sell it, the money acquired from this trade will flow back to banks. But I think we should do everything slowly to avoid hysteria.
But isn’t it true that mergers and acquisitions will improve our economy, and that strengthening banks and restricting cases in which multiple banks are owned by a single entity?
A reduction in the number of banks and the establishment of the Vietnam Assets Management Company (VAMC) is a wise move, but we still don’t have proper and clear policies. We want to discourage banks from using capital from deposits on risky investments and not contributing to a risk prevention fund. We have let this problem get out of hand so far. Moreover, it would be useless for two weak banks to merge. They would just drag each other down.
Some people have suggested that the government should not establish the new Vietnam Construction Bank because that sector is already being restructured and is facing difficulties. What is your view on the matter?
This is not a new bank. One of the weaker state-owned banks, Trust Bank, was turned into Vietnam Construction Bank. In my opinion, we can still open new banks for specific purposes. For example, we can still open export-import banks for further development in that area.
We do have the Vietnam Export-Import Bank (Eximbank), but over the years it has become a commercial joint stock bank. Other commercial banks can give loans to exporters but we need a specific bank to support exporters and exporting business.
Đăng ký: VietNam News
