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Restructuring banks does not mean eliminating small banks
Many people believe that small banks would be the first subjects for the bank restructuring, i.e. they would be weeded out from the current banking system. However, experts do not think this way.
Small banks under the probe
Several days ago, BIDV, a big state owned bank signed a cooperation agreement with two other banks, the small ones, GP Bank and Bac A Bank, the event that caught the special attention from the public.
The event would have been considered a normal business activity if it has not happened at this “sensitive moment,” when the State Bank of Vietnam has announced the plan on restructuring the banking system.
Understanding the problem, Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien said at the signing ceremony that the cooperation should be seen as a proof for the growing tendency of cooperating for the common development, which comes in line with the strategy on banking restructuring. He also stressed that this was really a normal business activity, though it took place at a very sensitive moment.
The deputy governor of the State Bank has to reassure the public because there was a rumor that tens of small banks would be eliminated in the bank restructuring.
When the cooperation agreement was made public, people guessed that in the bank restructuring process, big banks would be assigned to “coach” some small banks, and help them overcome temporary difficulties. If the small banks can get better, big banks would have capital contributions in the small banks. If not, the small banks would be swallowed.
Especially, the cooperation agreement comprises of a provision that BIDV would provide trillions of dong to support the liquidity of the two banks. Therefore, doubts have been raised that the two banks are facing liquidity problems and need the support from a big bank.
The third parties in the cooperation agreement then have to correct the information. BIDV Bank has affirmed that this completely does not mean that the two banks are facing liquidity problems.
Tran Bac Ha, Chair of BIDV, said that the restructuring would go in accordance with a plan to be drawn up by the State Bank. However, he can be sure that no bank would get dissolved or bankrupted, while the restructuring must not cause collapse. In the restructuring process, all the banks need to upgrade themselves, not only small banks.
Both small and big banks have their roles in the market
When asked about the restructuring, Deputy Governor Nguyen Dong Tien said that the banks that are facing difficulties would get support in the immediate time to overcome the current difficulties before entering the next stages of development.
Tien emphasized that both big and small banks can play their roles in the national economy if they develop in a healthy way. Both big and small businesses exist in the market, which compete with each other, while competition encourages banks to grow up and develop.
The goal of the bank restructuring is to help the banking system develop more effectively, not to eliminate small banks. However, merger and acquisition are encouraged by the central bank.
A representative of GP Bank said that a lot of banks were born as small banks and then developed very strongly to become giants. Therefore, it is not important how banks were big when at the establishment, but how they go to reach success.
Nguyen Viet Anh, Deputy General Director of Tien Phong Bank, noted that small banks meet a lot of difficulties, including the small networks and difficulties approach the majority of people, and the lack of prestige and the fierce competition with big banks. However, small banks only have their own advantages: being flexible and dynamic, they can easily get adapted to every circumstances of the market.
“Small” is not a synonym of “weak.” The health of banks needs to be measured by indexes - ROE, ROA, CAR and others,” Viet Anh said.
Le Khac
vietnamnet
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