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Closer supervision urged for banks
To strengthen oversight of the banking industry, supervision should be risk-oriented and based on a deep understanding of the business model, a French academic told a conference in HCM City yesterday.
Professor Arnaud Raynouard, a law professor at Universite Paris-Dauphine, said supervisors had to closely and regularly monitor and correct functioning of the banks, and make sure they were complying with the central bank's regulations.
Supervisors had to understand and evaluate risks. A result-oriented supervisory style that attempted to ensure weaknesses were addressed before they became serious was essential.
There was also need for robust on-site supervision which should be carried out by qualified and experienced supervisory staff who knew the banking system, both private and public sector, very well.
Efficient supervision entailed an ability among supervisors to judge the risks and to intervene.
"Only then will the regulated banking sector deliver benefits.
"The Vietnamese banking market is maturing and has opportunities to grow. Banks need to be more internationally active because of the economic impacts of global and regional integration," Raynouard said.
The application of international standards in Viet Nam's financial system remained inadequate.
There were some challenges since senior people in supervisory agencies in many countries often had a poor understanding of financial institutions and little or no financial sector experience.
Each supervisory institution implemented just its own task without co-operating with others, which consequently made supervision difficult.
The Government had to come up soon with effective solutions to consolidate and strengthen financial market supervision, particular with a clear legal framework.
Without legal protection, supervisors would be extremely cautious in taking action.
"Moreover, an open economic market should not have many banks that are so weak. So Viet Nam needs to concentrate on mergers and acquisitions. Small banks can take the opportunity to transform to be safer," Raynouard said.
Truong Thanh Duc, a lawyer who has worked with banks for many years, said mergers would continue to take place on both voluntary and compulsory bases in the country because it was saddled with many weak, small banks, especially in the context of the economic crisis and Government's stringent requirements.
Supervision of Vietnamese banks were yet to be done effectively, he admitted, saying commercial banks merely had to make periodical reports to the State Bank of Viet Nam.
In Viet Nam, the responsibility to oversee banks – as well as the securities and insurance markets – lies with the National Financial Supervisory Committee.
The conference was organised by the France-Viet Nam Management Training Centre, or CFVG, and the French Chamber of Commerce and Industry in Viet Nam (CCIFV).
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