Bank classification won’t make chaos on monetary market

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VietStock FI English - 36 month(s) ago 6 readings

Economics have tried to reassure the public by affirming that the bank classification and the credit growth rate quota granting will not cause any problems in the monetary market.

A lot of the banks have announced their credit growth rate quotas in the last week. As anticipated, besides the three big guys Vietinbank, Vietcombank and Techcombank, Eximbank, Maritime Bank, MB, VPBank, VIB, SeaBank, Sacombank and ACB have been glad to be put in the first group – the group of the best banks.

The list of the second group banks is longer with the names of Nam A, Dai A, Phuong Nam, Phuong Dong, SHB, Lien Viet Post Bank, Bao Viet Bank, Nam Viet, Kien Long, Mekong, and An Binh.

As such, just over 10 banks have not revealed their ranking yet, including Dong A, Saigonbank, Bac A, HD Bank, SCB, Viet A, GP Bank, Ocean Bank, Phuong Tay, Dai Tin and Tien Phong.

Dau tu has quoted its source from the State Bank as saying that there are eight banks belonging to the fourth group. The information proves to come in line with the central bank’s statement that 5-8 banks would be merged and restructured in the first quarter of 2012.

People are trying to make a wild guess about the names of the bad banks, paying special attention to the banks which are considered as having weak liquidity and having to pay high interest rates to lure deposits. The banks once had to ask for the liquidity support from bigger banks and the refinancing from the central bank in 2011.

Analysts have warned that once the names of the worst banks are made public, this may make the market chaotic, because people would rush to withdraw money from weak banks to deposit at healthy banks to feel secure about their money.

Dr Nguyen Tri Hieu said on Dau tu that the reactions of depositors and bank shareholders prove to be unpredictable. This may happen that depositors would rush to withdraw money from banks, while shareholders would bargain away the shares of the weak banks.

Meanwhile, Deputy Head of the Central Institute for Economic Management CIEM Vo Tri Thanh does not think this way.

Thanh said that once the banks still keep operation, the State Bank will still have to guarantee for people’s deposits, i.e. that no need for depositors to worry that they may lose money.

In fact, the outstanding loans and mobilized capital of the weak banks just account for a small proportion of the outstanding loans and mobilized capital of the whole banking system. Moreover, Thanh added, the weak banks will be treated in the time to come. Therefore, even if the banks’ names are made public, this would not cause any big worries.

“I think that it is impossible to deal with weak banks right in the first quarter of 2012 as previously planned, but the work would be possible in the second quarter,” Thanh said.

A lot of commercial banks have expressed their discontent when receiving the notices from the State Bank about the classification.

A director of a joint stock bank which ranked “A” in the previous years, said that his bank belongs to the second group of banks this year.

“I cannot tell the difference between the A class of the previous years and the first group this year. We are in no way inferior to other first group banks in terms of assets, corporate governance, liquidity and bad debts,” he said.

The move by the central to classify banks and allocate credit growth rate quotas has caught the special attention form international institutions and press. “Vietnam banks: credit for the healthy”, the article by Ben Bland on The Financial Times says that Vietnam is trying to settle the problems of the banking system to the every root.

Meanwhile, Moody’s has affirmed that the credit growth limits can help settle some credit challenges of banks,

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