Recommendations for supervision of companies and non-bank financial intermediaries

One of the practical recommendations for economic development in the first quarter of 2024 by experts from the National Economics University is related to promoting the supervision of non-bank intermediary financial institutions to ensure the safety of the financial system.

Accordingly, non-bank financial intermediaries are business organizations in the financial and monetary sector such as insurance companies, finance companies, investment funds, and credit funds...

Experts from the National Economics University believe that the State Bank (SBV), the Ministry of Finance, and the State Securities Commission need to continue to strengthen inspection, examination, and supervision towards management, supervising the activities of these companies and organizations according to function.

According to experts, inspection and supervision activities need to be based on risk management, strictly related to lending operations and credit contracts; At the same time, it is necessary to review and closely monitor ethical risks for inspection staff and direct management of the enterprise.

At the same time, the above management agencies need to promote restructuring of non-bank financial intermediaries under their management especially control losses and bad debts of financial companies. In particular, it is necessary to promote merger and acquisition activities as well as closely supervise and drastically urge to increase the charter capital deadline and ensure the safety ratios of these organizations.

Companies and non-bank financial intermediaries need to strengthen their executive management and risk management capabilities. Photo: Illustration

Regarding financial companies, at the end of 2023, at a conference on consumer lending, Mr. Nguyen Quoc Hung, Vice President and General Secretary of the Banking Association, said that the entire system had 15 financial consumption Vice President and General Secretary of the Banking Association, said that the entire system had 15 financial consumption companies. However, the bad debt ratio of financial companies is at risk of increasing above 15%, many companies are falling into difficulties, even losing money due to having to make high provisions for bad debt risks.

According to the financial report of Tin Viet Finance Joint Stock Company (VietCredit), in 2023, profit after tax reached more than 19.2 billion VND, down nearly 70% compared to 2022. The ratio of bad debt to total outstanding debt was at more than 18.4%, while in 2022 this number was at 11.8%, in which group 4 debt (doubtful debt) by the end of 2023 increased 2.2 times compared to 2022.

With FE Credit, VPBank said that since 2023, the bank's leadership has implemented overall restructuring, review and adjustment of form, business model, and risk management model, focused on fewer risk segments to control bad debt. Currently, this company has not updated its latest business results, but in the first 6 months of 2023, FE Credit recorded a loss after tax of up to 2,996 billion VND.

At HD Saison, in 2023, this company recorded a pre-tax profit of 660 billion VND, down 42.7% compared to 2022. The ratio of bad debt to total outstanding debt was 7.6%, an increase compared to 7.1% of the previous year.

Amid current difficulties, experts from the National Economics University highly recommend that companies and non-bank financial intermediaries need to strengthen their administrative and risk management capacity. Moreover, it is important to strengthen internal supervision activities, invest in modernizing technology, promote the application of digital technology, improve the quality of human resources and operational information transparency, and prevent manipulation by individuals and fraudsters in commercial transactions moral hazards.

At the same time, companies and non-bank financial intermediaries need to strengthen cooperation, expand information exchange and coordinate with relevant agencies in developing and diversifying financial products, credit, securities, insurance, and new business methods, and encourage research and development of new products for different customers.

Currently, non-bank financial companies have also been implementing many strategies to strengthen their financial capacity. In particular, many financial companies have "sold themselves" to foreign investors to improve their business capabilities and increase investment potential, especially when Vietnam is considered to have a spare room and potential for consumer credit.

The hottest news recently is that Home Credit Group announced that it has signed a conditional framework agreement to transfer 100% of the capital contribution in Home Credit Vietnam Finance Company Limited to The Siam Commercial Bank Public Company Limited (SCB) - a member of SCBX Public Company Limited (SCBX), Thailand. According to the announcement, this deal is worth about 800 million euros (approximately 22,000 billion VND). The transfer agreement is expected to be completed in the first half of 2025, after approval from the competent authorities of Vietnam and Thailand.

Previously, at the end of 2023, SeABank signed a contract to sell all capital at Post and Telecommunications Finance Company Limited (PTF) to AEON Financial Service Co., Ltd. - a member of AEON Group. SHB also transferred 50% of the charter capital of Saigon - Hanoi Commercial Joint Stock Bank Finance Company Limited (SHB Finance) to Krungsri Bank of Thailand. 2 years ago, VPBank also transferred 49% of FE Credit's charter capital to a subsidiary of SMBC Group (Japan)...