Concerned about handling weak banks, restructuring credit institutions still has many difficulties

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Dealing with weak banks is still difficult. Source: Internet.

In the Government's report sent to National Assembly delegates on issues related to the banking sector before the 6th Session, on the handling of specially controlled banks and weak credit institutions (CIs). Up to now, the State Bank (SBV) has submitted and received approval from the competent authority on the policy of compulsory transfer of 4 specially controlled banks, Vietnam Construction Commercial Bank Limited (CBBank), Ocean Commercial Bank Limited (OceanBank), Global Petroleum Commercial Bank Limited (GPBank) and Dong A Commercial Joint Stock Bank (DongA Bank).

Currently, the State Bank is directing relevant parties to carry out the next steps to submit to the Government for approval the plan to restructure these banks according to the prescribed order and procedures.

For Saigon Commercial Joint Stock Bank (SCB) placed under special control from October 2022, the State Bank of Vietnam has urgently and actively coordinated with ministries and branches to implement solutions according to legal regulations to ensure banking system safety and ensuring the rights and interests of depositors; At the same time, based on the report assessing the overall situation and proposing restructuring policies of SCB and the SCB Special Control Board, the State Bank is looking for investors to participate in restructuring SCB to submit to the Government for review. Review and decide on the policy of restructuring SCB according to regulations.

For weak non-bank credit institutions, according to the report, the State Bank has submitted a plan to restructure Handico Finance Company. The State Bank of Vietnam has also sent an official dispatch requesting the Ministry of Transport to direct the Shipbuilding Industry Corporation (SBIC) to urgently develop a plan to restructure the Shipbuilding Industry Finance Company (VFC) and the Leasing Company. Shipbuilding industry finance (VFL). In case VFL and VFC do not have a feasible restructuring plan approved, the Ministry of Transport is requested to direct SBIC to bankrupt VFL and VFC according to its authority.

Speaking before the Standing Committee of the National Assembly on October 16, Governor of the State Bank of Vietnam Nguyen Thi Hong said that handling weak banks under normal conditions is difficult, but in the current world and domestic economic context, it is even more difficult. Therefore, since the beginning of the term, the Government and Prime Minister have also directed very drastically and the State Bank, ministries and branches have also been actively implementing it.

However, according to the Economic Committee's verification report on the mid-term assessment report on the implementation of the Government's Socio-Economic Development Plan and Economic Restructuring Plan for the period 2021-2025 The capacity and efficiency of management for credit institutions are still limited; the situation of "cross-ownership", collateral assets being valued incorrectly, lending to "internal" and "backyard" businesses is still complicated.

In particular, the inspection agency also pointed out that the process of handling weak banks and restructuring "compulsory purchase" banks faces many difficulties in terms of legal corridors and support mechanisms.

At a group discussion session on a number of socio-economic issues on October 24, President Vo Van Thuong also pointed out that over the past 10 years, "zero dong" banks have not been completely resolved, despite the policy of restructuring. The country's owner said that this problem poses great risks.

According to National Assembly delegate Ha Sy Dong (Quang Tri delegation), the issue to note is that bank bad debt is high and will continue to increase, reflecting the health of the real economy. As of the end of July 2023, the on-balance sheet bad debt ratio is 3.56%, higher than 2% at the end of 2022 and 1.69% at the end of 2020.

"Concerningly, according to the information I have, if updated until August 31, the bad debt ratio of the whole system will continue to increase to nearly 8%, the main reason is due to the bad debt of one bank being suspended. Special control spikes. This number will continue to increase when potential bad debts as prescribed in Circular 01/2020/TT-NHNN (amended and supplemented) and Circular 02/2023/TT-NHNN since expiry date is limited, extended or postponed" Mr. Ha Sy Dong stated.

Therefore, National Assembly delegates expect that the Law on Credit Institutions (amended) project will be considered for approval at this 6th Session with the addition of many regulations that will help the banking system restructure and Handle bad debt more effectively. Because compared to the draft Law submitted to the National Assembly by the Government at the 5th Session, the draft Law on Credit Institutions (amended) after being received and revised includes 16 chapters and 208 articles (increased by 3 chapters and 13 articles).

Speaking before the National Assembly on October 23, National Assembly Chairman Vuong Dinh Hue commented that this is a difficult Law project with many in-depth contents, directly impacts financial and monetary policies, macroeconomic stability and many subjects. Therefore, it is necessary to closely follow the viewpoints, requirements, and major policies set out when developing the Law project, handling the issue of cross-ownership, manipulation, and domination of credit institutions; issues of early intervention and special control of credit institutions; regulations on bad debt and bad debt handling...