Caution advised on bank reform

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VietNam News English - 42 month(s) ago 13 readings

Caution advised on bank reform

Restructuring the banking sector is necessary to improve its safety and soundness but the work should be done with caution if it is to be effective, high-ranking financial official say.

Customers sell US dollars at VIBank in Ha Noi. —VNA/VNS Photo Tran Viet.

HCM CITY —

Nguyen Van Binh, Governor of the State Bank of Viet Nam (SBV), said recently that the domestic banking sector, with 80 credit institutions, was large compared to the current scale of the economy.

Vu Viet Ngoan, chairman of the National Financial Supervisory Committee, concurred, adding it was necessary to eliminate weak banks.

Many financial analysts said that restructuring the domestic banking sector was not a new issue. It had been dealt with by the central bank for a long time but the process was very slow.

Former central bank governor Cao Sy Kiem said the first task in restructuring was to review the entire banking sector in order to have a full understanding of its real situation, including its weaknesses and shortcomings.

Measures should be based on these findings and be concretised for each bank to ensure effect-iveness of the renovation process, Kiem told the Dau tu (Viet Nam Investment Review).

While the restructuring effort should be made soon, banks should first be classified into groups, Ngoan said.

Many measures are usually applied, such as increasing the prescribed capital or issuing other criteria to ensure safety, but each group of banks would need different measures in the restructuring effort, he said.

Other experts said that restructuring the banking sector should be implem-ented in phases since most domestic banks were young and cannot develop strongly immediately.

Nguyen Duc Kien, vice chairman of the National Assembly's Economics Commission, suggested that the legal framework for merger and acquisation of banks be fine-tuned soon to facilitate the restructuring process.

But Kien disagreed with the policy of cutting the number of banks.

Small or medium banks should not be forced to be merged into large ones if they were still able to contribute to the country's socio-economic development, he said.

The most important factor in restructuring the banking sector was to accurately evaluate banks' operations as well as their contributions to the national economy. Banks' effectiveness must be given top priority, Kien said. — VNS

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