The banking sector continues to promote system restructuring and bad debt handling

The State Bank of Vietnam issued an action plan to implement the project on restructuring the credit institution system. Source: Internet.

The Governor of the State Bank of Vietnam (SBV) has just issued an action plan for the banking industry to implement the project "Restructuring the system of credit institutions associated with bad debt settlement in the 2021-2025 period."

The project "Restructuring the system of credit institutions associated with bad debt settlement for the period 2021-2025" in Decision No. 689/QD-TTg approved by the Prime Minister on June 8, 2022 states clearly that the action plan of the banking industry includes contents such as dealing with bad debts, improving credit quality for credit institutions, and improving financial capacity and operational efficiency of the Asset Management Company of Credit Institutions (VAMC).

Therefore, the SBV has set out an action plan to complete the legal framework on monetary and banking activities, restructure the system of credit institutions and deal with bad debts on the basis of full compliance with the rules of the market economy, in accordance with international practices and in accordance with the conditions of Vietnam.

Regarding solutions to support monetary policy management, the State Bank requested to enhance the effectiveness of banking inspection and supervision; improve the capacity and quality of the banking inspection and supervision team; and strengthen communication.

Regarding solutions to improve the efficiency and quality of operations of the system of credit institutions, the action plan of the banking industry has set out specific contents on improving financial capacity, credit quality, operational efficiency, business administration, banking modernization, digital banking model development along with specific regulations on bad debt handling, financial capacity improvement and operational efficiency by VAMC.

Previously, in response to a question about a member of the National Assembly, Governor of the State Bank Nguyen Thi Hong said that after four years of implementation, the objectives of the Project on Restructuring the system of credit institutions associated with bad debt settlement the 2016-2020 period has basically been achieved, in which the scale of the system of credit institutions continues to increase; financial capacity, quality of management and administration continue to be consolidated and improved.

However, compared with other countries in the world and in the region, the financial potential of the whole credit institution system in Vietnam is still low.

Among the four state-owned commercial banks, the bank with the largest equity is about US$3.8 billion, this level is much lower than some countries in the region such as Malaysia, Singapore, the capital owner of the largest bank must also be US$14-19 billion.

Therefore, the SBV proposes to the competent authorities that in the process of restructuring the system, the credit institutions need to increase capital and strengthen the capital's potential in operation.

According to the SBV, by the end of March 2022, the charter capital of state-owned commercial banks (Agribank, Vietcombank, VietinBank, BIDV) reached VND170 trillion, unchanged from the end of 2021; total assets reached VND6,719.44 trillion, up 5.17% compared to the end of 2021; Market 1 mobilized capital reached VND5,625.25 trillion, up 2.9% compared to the end of 2021.

For joint-stock commercial banks, by the end of March 2022, charter capital reached VND400.23 trillion, an increase of 1.69% compared to the end of 2021; total assets reached VND7,372.5 trillion, up 3.08% compared to the end of 2021; market 1 mobilized capital reached VND215,396.9 trillion, up 3.9% compared to the end of 2021.