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Small banks strive to survive
Some commercial banks targeted for restructuring by the central bank are making efforts to do it on their own, seeing that their survival depends on it.
GP Bank, Navibank, Trust Bank and Western Bank were on the central bank's list for restructuring this year because of their weak liquidity.
These banks show that their bad debt ratios are just around 2 per cent of the total outstanding loans. However, the real figure is closer to nearly 10 per cent.
To survive and develop, TrustBank and Navibank have taken the initiative in preparing their own restructuring plans and submitting them to the central bank and the government for approval.
A representative of TrustBank told the Dau Tu (Investment Review newspaper) that the central bank approved the bank's restructuring solution in September and allowed the implementation soon.
TrustBank's plan called for capital from domestic strategic shareholders with the biggest share to be held by a large-scale bank, he said.
"TrustBank believes that after the self-restructuring process is complete, it would be able to develop in a stable manner," he added.
Nguyen Hoang Minh, deputy director of the State Bank of Viet Nam's HCM City Branch, also revealed that his office has received the restructuring plan of Navibank, because the latter has been placed under its management.
The branch has already submitted Navibank's plan to the central bank and government for approval, Minh said.
Senior economist Pham Do Chi said that many small banks in the country have had modest prescribed capital and their Capital Adequacy Ratio (CAR) has been also low.
"In particular, the small banks' equity capital often accounts for only 10 per cent of their total assets, while the corresponding figure in other countries is about 20 per cent," Chi said, adding that this was a sign of weakness in the domestic banking sector.
Because of the banks' low equity ratio, the banking sector's restructuring process should not be implemented by merely reducing the number of commercial banks. It should be done through the mergers and acquisitions (M&A) to create comprehensive improvements in the Vietnamese financial system, Chi said.
SBV Governor Nguyen Van Binh has also said that restructuring was a voluntary exercise for small and weak banks to survive.
However, in case these banks cannot restructure on their own, the central bank would intervene by merging them with other banks, Binh said.
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