Vietnam Governor Says 26 Banks Being Inspected

Twenty six credit institutions have been being inspected by the State Bank of Vietnam (SBV) in the year to date and the inspection results will be publicized, SBV governor Nguyen Van Binh said on Tuesday.

Speaking at the discussion session of the National Assembly (NA) on Tuesday, Binh said SBV has launched full inspection and invited foreign independent auditors to conduct financial audits of each bank.

Because a number of banks are under merger and restructuring, the central bank does not announce the inspection results, respecting self-treatment of banks, especially those with foreign partners. The central bank will only publish the final results, said the governor.

The number of inspected banks that Governor Binh revealed on Tuesday is different from the one he told the question and answer session of the NA Standing Committee on August 21. Back then, he said nine banks were under inspection.

These credit institutions had reported bad debts ratios of less than 2.5%. Some even had reported profits.

However, through inspection, SBV found bad debt ratios of some banks reached as much as 30%. Certain lenders even had bad debt ratios of over 60%, losing all their equity and chartered capital.

The liquidity situation in the banking system was very tense in the fourth quarter last year, posing a risk of system collapse. “Back then, we listed 12 credit institutions on the brink of bankruptcy,” Binh said.

Binh said the Government had passed the scheme for restructuring the banking system from now to 2020 with specific steps for each year. Merger and treatment of weak banks is only part of the scheme, with an aim to make credit institutions healthy.

To handle weak banks, the Government has set up an interdisciplinary steering committee headed by a deputy prime minister. “Bank restructuring is not only done by SBV but many ministries will also participate in the process,” said Binh.

Criteria for classifying a bank as weak or healthy is given in the Credit Institution Law and relevant documents, he informed.

In regards to bad debts, he said the figure was not constant but would change over times. The bad debt ratio varies depending on criteria, but the figure of the central bank is the best grounded, said the governor.

Bad debts have kept rising since the year’s beginning, consistent with the economic developments. Now, the situation has improved, so the growth in bad debts has slowed down.

“Tacking bad debts does not depend on the will of banks, but a joint will of related parties,” said Binh.

He informed bad debts in the construction industry alone had amounted to over VND90 trillion. If this sum was cleared, the situation would improve.

“The bank restructuring scheme sets a goal that by 2015 the bad debt ratio will be pulled down to 3% in accordance with the international rules,” said the governor.

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