Late last year, the central bank categorized the credit institutions into four groups, including those with healthy operations (group 1), average operations (group 2), below-average operations (group 3), and finally, weak operations (group 4).
"The credit institutions listed in group 4 are struggling with severe lack of liquidity, on the verge of disruption and under restructuring process," said SBV deputy governor Nguyen Dong Tien at a press briefing in Hanoi last week.
According to a banker of a credit institution belonging to this group, the central bank has sent a team of supervisors to keep a close eye on all the activities of his bank, from deposit transactions to debt reclamation, newswire VnEconomy reported.
Even worse, some healthy banks listed in group 1 and 2 have managed to obtain the list of banks in group 4, which was expected to be kept confidential by the central bank, and have made use of it to attack the weak institutions.
“These days are difficult for us,” said another group-4 banker.
“Not only are we not allowed credit growth, we also have had our customers ‘stolen’ by our rivals.”
He said bankers of healthy credit institutions would show out a list of banks in group 4 to depositors, and told them not to put their money into these weak banks.
At a time when banks are all subject to the deposit interest rate cap of 14 percent a year, most depositors will not choose unsafe banks, he said.
Struggle to survive
Faced with these difficulties, however, weak banks are still struggling to remain operational. With their credit growth disallowed, credit institutions belonging to group 4 now choose to reclaim debts to maintain operations.
Specifically, they set up a board specializing in handling debts and boost the repayment of unsettled debts.
However, a deputy CEO of a bank also admitted that it is hardly simple to reclaim debts in the current context.
With debts classified as belonging to group 5, debtors are most likely to become insolvent, and the bank has no choice but to liquidate their assets, he said.
But, he added, most banks are discouraged by the complicated paperwork required for asset liquidation.
“Moreover, banks will also face difficulties reselling the liquidated real-estate assets, given the current frozen market.”
Besides strengthening debt collection, many weak banks also choose to restructure their asset inventory, as well as the operation targets -- focusing on retailing, and banking services.