(VOV) - The primary task for restructuring commercial banks is to resolve bad debts and simplify lending procedures, say economists.
Cutting interest rates for capital restructuring
Credit outstanding in 2012 to reach 12-13 percent
They explain that besides some certain successes in the integration process, Vietnam’s commercial banks reveal several shortcomings in terms of administration, human resources, rising bad debts and a low level of liquidity.
Vietnam now has more than 80 banks, an excessive number compared to the economic demand, which has resulted in some of the smaller banks facing serious shortages of capital and low liquidity levels.
Vu Thi Phuong Hoa, an official from the Ministry of Finance, says Vietnam’s financial system depends mainly on the banks, which along with non-banking credit organizations account for 75 percent of the financial sector’s total assets.
However, after recording some massive developments, some banks had breached principles of business administration and risk management, resulting in their increasing bad debts.
The current macroeconomic difficulties have raised business debts across the country while the stagnant stock and real estate markets have run up even more bad debts with the banks.
The State Bank of Vietnam (SBV) estimates that by the end of the first quarter of 2012, the bad debt rate stood at 3.6 percent, or over VND85 trillion (US$4 billion). Yet the figure is said to be higher due to lack of transparency in financial reports.
Pham Ngoc Hung, Vice President of the Ho Chi Minh City Business Association, states that restructuring should pay attention to how banks ‘look’ at businesses. The more difficulties the economy experiences, the more small businesses are affected and they find it even harder to access bank loans.
The banks themselves say that they want to lend to businesses, based on their financial transparency and how feasible their projects are, but businesses’ financial reports are unreliable.
Vo Thanh Ly, Deputy General Director of the Mekong Housing Bank, says that his bank is ready to share the economic burden when businesses meet all requirements laid down by the SBV.