Some weak banks that are undergoing restructuring might get out of the worse thanks to unprecedented support measures under a new law.
(Photo: thoibaokinhdoanh.vn)

Hanoi (VNA) - Some weak banks that are undergoing restructuring might getout of the worse thanks to unprecedented support measures under a new law,experts have said. Therevised Law on Credit Institutions, which has taken effect since January 15this year, includes many regulations to help weak banks rebound and resumehealthy performance with support from the State Bank of Vietnam (SBV) and otherstrong credit institutions that are entrusted to support the weak ones. Accordingto experts, weak banks need to have good liquidity to resolve their problems,however, it is not easy, especially when their brands are negatively affecteddue to being put under the special supervision of the central bank. Withoutliquidity, their accumulated losses will become more serious as they have tocontinue paying deposit interest rates to have the capital for balancingnon-profit assets and funding costs of rising bad debts. Bankingexpert Nguyen Tri Hieu reveals to online newspaper thoibaokinhdoanh.vn that thecentral bank has many devices to help weak banks improve liquidity so that theyhave enough money for operation. The liquidity support is very important forthe banks to have a chance of rebound before the central bank takes other measures. Under thenew law, when a credit institution has been put under the SBV’s specialcontrol, SBV shall decide on measures to deal with the institutions, includingthose to recover the institutions. The lawstipulates that during the recovery period, weak banks can receive preferentialloans, even at an interest rate of zero percent, from the SBV. They can alsoreceive deposits or loans at preferential interest rates from their supportingcredit institutions, along with a permission of buying corporate bonds of thesupporting credit institutions.

Inaddition to the provisions on liquidation, the law also regulates a host ofother amendments, which aim to improve the governance and operation of weakcredit institutions.
Analystssaid these new regulatiꦫons provide the legal framework necessary for theGovernment t✅o better handle underperforming banks.

Duringthe past four years of the country’s banking system restructuring, the SBV hadto compulsorily acquire three weak banks — Vietnam Construction Bank, OceanBank and GP Bank — at zero dong. Therestructuring has been also implemented in other weak banks for the past fewyears and some of them have tended to perform better. The National CitizenJoint Stock Commercial Bank (NCB), for example, has increased its chartercapital beside promoting financial services and restructuring board ofdirectors. Especially in 2017, this bank gained a net profit of about 265billion VND (11.6 million USD), up 26 percent over the same period of 2016. Under thenew rules, banks which have successfully restructured like NCB will certainlyhave more opportunities to perform better.-VNA