Updated  
March, 27 2012 09:16:35

SBV to bail out banks in trouble

HA NOI — Insolvent banks unable to cover payment demands from depositors will receive support from the State Bank of Viet Nam or other commercial banks if their defaults were likely to have a negative impact on the entire banking system, according to a new circular issued by the central bank last week.

Issuance of Circular No 06 is also being viewed as an opening salvo in the regulatory process required to implement the nation's plan to re-organise the banking industry by 2015.

Under the circular, the State Bank would play a key role in requiring stronger credit institutions to refinance debt loads for weaker banks or would provide financing directly.

Credit institutions which have lost their payment capacity due to serious problems will receive loans at preferential rates equivalent to the re-financing interest rate announced by the central bank. If the banks receiving the support fail to repay the loans when due, they will be charged interest on past due amounts at 1.5 times of the initial rates.

The borrowers must use funds from preferential loans to pay their individual depositors. Using the loan proceeds to cover institutional depositors may proceed with the approval of the State Bank Governor.

A number of banks have low liquidity because they have used short-term deposits to fund medium- and long-term lending. Under pressure to meet credit growth and profit forecasts, banks have also lent a significant amount of money to the high-risk real estate and securities industries.

Although the central bank has allowed banks to use up to 30 per cent of short-term deposits for medium- and long-term loans, a number of banks have lent up to 70 per cent. At a meeting held in Ha Noi last week, State Bank Governor Nguyen Van Binh said that the nation now had nine poorly-performing credit institutions. These were now under supervision by the central bank in order to prepare for their reorganisation.

Under a plan approved by Prime Minister Nguyen Tan Dung earlier this month to restructure the banking by 2015, domestic commercial banks would be classified into three groups – healthy, temporarily short of liquidity, and fragile – in order for authorities to approve suitable measures, such as re-organisation, merger or acquisition, reform of risk management systems, or the interference of the State Bank or other agencies. — VNS

Send Us Your Comments:
Name:
Your E-mail address:
Title:
 

VietNamNews may edit your comments and not all emails will be published.

Highlight

Light it up with fire on Hue's Truong Tien Bridge Light it up with fire on Hue's Truong Tien Bridge

The 150-year-old Truong Tien Bridge, which spans over the renowned Huong (Perfume) River in Hue City, was lit up by fire in an installation by French artist Carabosse on Friday evening.

Hospital provides free asthma treatment Hospital provides free asthma treatment

The Bach Mai General Hospital will provide free check-up consultations and treatment to newly asthmatic patients on April 26, to mark Global Asthma Day (May 1).

Failure to address water pollution has consequences 1    Failure to address water pollution has consequences

Viet Nam needs to have a comprehensive, unified set of rules to control water pollution in the country, because the problem has assumed very serious proportions, experts and officials said at workshop yesterday.

Tokyo police release VNA flight attendant Tokyo police release VNA flight attendant

Vietnam Airlines announced on Wednesday that the Japanese authorities had released its 25-year-old flight attendant who had been arrested on suspicion of smuggling stolen goods.

Paean to people with disabilities Paean to people with disabilities

A photo exhibition in Dong Nai Province underscores the will and perseverance of 25 disabled people who overcame their situation to lead normal lives.