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VietNamNews

PM outlines banking reform

Update: March, 06/2012 - 10:24

 

A customer makes a transaction at an Agribank branch. The Goverment will encourage foreign banks to co-operate more closely with local banks. — VNA/VNS Photo Pham Hau
HA NOI — Foreign banks will be encouraged to compete equally as well as boost business co-operation with domestic credit organisations, under a plan adopted by Prime Minister Nguyen Tan Dung last week.

The scheme for restructuring the banking system through 2015 would call for the forging of close links between local and foreign institutions to help develop products, improve governance and modernise technology.

Foreign ownership ratios would be increased, particularly for weaker joint-stock commercial banks. Foreign institutions will be encouraged to contribute capital and buy stakes in weaker domestic entities, while parent institutions overseas would be asked to guarantee the payment capacity of affiliates in Viet Nam.

Domestic commercial banks and finance companies would therefore be classified into three groups – healthy, temporarily short of liquidity, and fragile – in order for authorities to approve suitable measures, such as reorganisation, merger or acquisition, reform of risk management systems, and the interference of the State Bank of Viet Nam or other agencies.

Dung has also tasked the Ministry of Finance to co-operate with the State Bank of Viet Nam to develop a plan to deal with the bad debts of credit institutions, as well as plan needed increases in charter capital by State-run commercial banks through 2015. The State Bank last month allocated varying credit growth quotas for this year to four groups of banks based on their health and performance.

Dung said State-owned commercial banks would also play an important role in the restructuring of the banking system.

"They should be the driving force in the banking system, with large scale, safe and efficient operations, advanced management capacity, and the capability to compete domestically and internationally," Dung said.

Dung urged State-owned banks to implement comprehensive restructuring by hastening equitisation, improving asset quality, expanding transaction networks, diversifying capital sources and controlling credit quality. They should target a bad debt ratio of below 3 per cent and gradually reduce outstanding loan ratios to no more than 90 per cent of deposits, he said.

By 2015, there would be then be one or two State-run banks which would rise to a regional level in terms of scale, management, technology and competitive capacity.

"They should be flagship institutions in investing in key sectors of the economy such as infrastructure, export, agriculture, rural areas, production, and small – and medium-sized enterprises," Dung said. — VNS

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