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Vietnam vows to reform small banks
The State Bank may consider refinancing small banks so the banks can have sufficient capital, while the refinancing capital would be seen as the capital to be contributed by the State Bank, which means that the State Bank would become the big shareholder who has the right to regulate small banks and make decisions.
Sources say these are the measures the State Bank of Vietnam is considering and it may put it forward at the upcoming meeting, which gathers representatives from commercial banks and discusses the measures to slash lending interest rates.
Small banks will also have the right to have their voice about the monetary policies relating to them, and this would be one of the hot topics to be mentioned at the meeting.
Small cats catch small mice
As such, the banking reform would begin from the renovation of small banks. The upgrading of a series of rural joint stock banks into urban banks five or six years ago has left its trace at small banks. “Small banks” have been referred to the banks which not only have low chartered capital, small networks and operation scale, but also have low technology and corporate governance skills.
The process of shifting from rural to urban banks always comprises economic and political interests and the interests of the groups of big shareholders. Therefore, reforming small banks will require a long term vision, firm stuff and of course, the support of the whole banking system, enterprises, and the public.
A high ranking official of the State Bank of Vietnam said that the viewpoint of the management agency is that small banks also play certain roles in the development of the national economy, because “small cats catch small mice.” Small banks mostly target business households, farmers, individuals, small merchants and small enterprises.
The problem does not lie in the small scale, but in the healthiness of banks. The official said that “problematic banks” would be found out based on that principle. The small banks which do not have high capital enough or have weak liquidity would be refinanced to get sufficient capital.
The official has rejected the opinion that it would be very difficult to arrange enough capital to refinance to small banks, saying that the total amount of capital to be refinanced to the banks would make nothing if compared with the total capital of the whole banking system, about 10-15 trillion dong.
When refinancing small banks, the State Bank will have the right to set up requirements in order to minimize risks. For example, banks would only be able to mobilize capital at certain levels, depending on owners’ equity.
The limitations, by the nature, could be considered as the method to narrow the banks’ operation scale until the small banks get healthy again.
If the small banks really can get stronger, they would be able to join the banking system. If they “flutter”, they would be swallowed or forced to dissolution.
The measures being considered by the State Bank are believed to be the reasonable solutions which step up the process of consolidation, and help reduce the number of banks to the level suitable to the economics conditions.
In order to get refinancing, small banks would have to mortgage their assets for the capital. If they do not have mortgaged assets, the capital to be pumped by the State Bank will be considered the bank’s capital contribution. And once becoming the big shareholder who holds controlling stakes, the State Bank will have the right to regulate the banks to do what it wants.
Of course, small banks which have financial problems have the right to receive more capital or refuse the capital. However, experts believe that they should choose the best solution for their existence.
vietnamnet, Lao dong
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