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SBV to merge weak banks
Deputy Governor of the State Bank of Vietnam Tran Minh Tuan said at a recent meeting with leaders of economic groups and general corporations that the central bank may consider merging weak commercial banks, though it has been trying to help improve banks’ liquidity.
Tuan said that with the principle of not allowing any bank to fall apart, the State Bank has been trying to help banks improve their liquidity through open market operations and refinancing.
However, Tuan said that the operations will not be used forever for weak and small banks. It is necessary to consider the possibility of merging some banks so as to strengthen the banking system.
Tran Bac Ha, Chairman of the Bank for Investment and Development of Vietnam (BIDV), has warned that in the last six months of the year, a decline in banks’ profit will occur as a result of high inflation and economic recession.
Moreover, Ha said that more non-performing loans will appear as many loans will mature, but enterprises will not be able to pay them. This will contribute to worsening the liquidity of small and weak banks.
At the workshop held in Hanoi one week ago by Ernst & Young, the heightening of the standards for capital safety ratio for banks was mentioned by the participants.
Pham Huyen Anh, Deputy Head of the Banks and Non-bank Credit Institutions Department under the State Bank of Vietnam, said that it is now the right time to reconsider the regulations on capital adequacy ratio (CAR) in order to make the regulations come in line with Vietnam’s banking system development and international standards.
Currently, the CAR stipulated by the State Bank of Vietnam is 8% (Basel I accord standard). Meanwhile, banks in the world are now applying Basel II accord standard, at 12%.
VNN
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