‘VN banks can be manipulated'

Transactions take place in OceanBank. Regulations on banking activities currently lag behind the operation of the system. — VNA/VNS Photo Tran Viet

HA NOI (VNS)— Regulations have not kept pace with the nation's fast-growing banking system, State Bank of Viet Nam Governor Nguyen Van Binh said on Sunday on a Dialogue with the People programme broadcast by Viet Nam Television.

Commercial bankings were not yet fully monitored due to a lack of capacity, Binh said, opening opportunities for groups or individuals to manipulate banks.

In some banks with only one or two shareholders or a group of dominant shareholders, about 70-90 per cent of bank loans were set aside for borrowers with ties to these shareholders, forming an interest group, he said. Such borrowers often used capital ineffectively, causing losses and driving banks toward insolvency.

"The existence of such groups is the biggest obstacle to the process of restructuring the nation's banking system as they are able to manipulate banks and have an impact on the entire system," Binh said.

Some groups of shareholders were also co-operating with local and foreign partners to provide incorrect information to bank regulators, he added, saying that their purpose was to confuse the public and slow the process of regulatory intervention.

However, Binh affirmed, the State Bank was determined to get rid of these groups to make ailing banks and the entire system healthier.

Regarding recent scandals involving major shareholders of Asia Commercial Bank, Binh urged the public to respond cautiously to such rumours. He said they could feel secure about the overall soundness of banking management and restructuring since the State Bank and other State agencies have mapped out all possible scenarios and solutions for each of them.

Binh also said that the current difficulties facing businesses were not due to tight monetary policies, explaining that interest rates would rise and liquidity decrease if such policies were applied. As it stands, he said, the country has seen a reduction in interest rates and improved liquidity over the past year.

The central bank's monetary policies were not tightly controlled but remained flexible, Binh said. — VNS