Breakthrough in restructuring commercial banks

(VEN) – After one year of restructuring commercial banks, initial advances had been recognized. The overall activity of interbank market had been correct towards transparency, the safety of the bank system had been improved, risks had been pushed back and the property of the state and people had been ensured.

The safety of credit institutions had been significantly improved. Weak credit institutions standing before the risks of collapse had been tightly controlled and had been handled by appropriate solutions, contributing to stabilize the currency market.

Merging and restructuring nine banks were implemented over a year ago. Of which, the merger of the Saigon Commercial Bank (SCB), Ficombank and TinNghiaBank brought positive results. Three banks did not ensure credit-worthiness before the merger due to the using of short-term capital resources for long-term loans (mainly focusing on the real estate market). When the real estate market changed, short-term capital resources did not enough to mobilize. Therefore, three banks’ boards of directors voluntarily merged together into a joint-stock commercial bank (SCB) under the sponsor of the Bank for Investment and Development of Vietnam (BIDV) and the support of the State Bank of Vietnam (SBV) through refinancing loans. As of December 2012, BIDV supported over VND2.4 trillion in capital for three banks. Together with this support, the merged bank has a charter capital of VND10 trillion, total assets of VND150 trillion and more than 200 branches and transaction offices.

According to SBV’s assessment, this merger had achieved positive progresses. The new bank’s liquidity has been improved significantly through measures to increase charter capital. Mobilizing capital from the new bank’s economy increased by 35.9 percent in 2012 and increased by seven percent in the first two months of 2013. Therefore, the new bank has ensured the safety of state property. Under the close supervision of SBV, the new bank is currently promoting the implementation of measures to overall restructuring.

According to a report in terms of production and business activities, the new bank achieved profits of VND1 trillion in the last quarter of 2012, contributing to declining losses to VND95 billion. By the end of 2012, deposits in the new bank were double compared to the same period last year, reaching VND77.6 trillion. The amount of money for loans reached VND56.813 trillion.

In addition to three above banks, four other banks, including NaviBank, TrustBank, TienphongBank and GP Bank have also been restructured. According to an initial report, the restructuring had achieved positive signs.

In addition to positive results, the restructuring of the banks was slow compared to the plan. According to Vietnam Institute of Economics PhD To Anh Duong, basic measures to deal with bad debts had not yet been found and the management of credit institutions was weak. Therefore, risks can happen at any time.

To effectively restructure banks and achieve objectives, in addition to the completion of the legal framework for banking activities, PhD To Anh Duong suggested some solutions, such as focusing on dealing with bad debts, overcoming difficulties for the real estate market, resolving inventories for businesses and promoting the restructuring of state-owned enterprises. In addition, promoting mergers and acquisitions (M&A), enhancing capacity in terms of the financial autonomy for banks, strengthening the management of risks based on international standards, improving effectiveness of inspection, resolving problems in terms of cross-ownership of banks and ensuring the transparency of information were also underlined./.

Thu Hang