Hanoi (VNA) – The central bank on July 21 held an online conference toprepare for the implementation of the scheme to settle non-performing loans(NPL) and restructure credit institutions in the 2016-20 period.

Addressing the discussion, State Bank of Vietnam (SBV) Governor Le Minh Hungtalked about the implications of the National Assembly resolution on NPLsettlement approved last month and Prime Minister Nguyen Xuan Phuc’s Decision1058/QĐ-TTg on credit institutions restructuring in the 2016-20period issued on July 19, which gave the scheme the green light.

Besides bad debt settlement, the scheme lists objectives, principles, solutionsand itineraries to restructure the system of credit institutions in the period.

To implement it, Hung has asked all credit institutions to map out their ownrestructuring plans and submit it to relevant management agencies for approval.

In their restructuring plans, institutions have to look at and assess their ownfinances, corporate governance, shareholders and charter capital ownershipstatus.

They have to also detail the objectives, orientations and solutions proposedfor their restructuring and for bad debt settlement for each year.

Hung has instructed all credit institutions to set up steering committeesfocused on these issues so that they can spot and report hurdles in theimplementation process to the central bank without any delay.
As the process of restructuring credit institutions and settling bad debts islinked to many ministries, agencies and organisations, Hung said he expectedsupport and co-operation from all concerned so that the scheme can beimplemented successfully.

Under the scheme, all credit institutions will be restructured. The SBV willcategorise solutions to restructure credit institutions into groups based onthe type of credit institution. The country’s system of credit institutionscurrently includes State-owned banks, joint stock banks, finance companies,financial leasing companies, foreign credit institutions, co-operative banks,People’s credit funds and microfinance institutions.

Methods and measures to restructure credit institutions will be applied inaccordance with the specific nature of each institution and in line with themarket mechanism based on caution, ensuring the rights of depositors, andmaintaining stability and system security under the Government’s policies onrestructuring the financial market.

The disposal of bad debts in the next few years must be linked to theimplementation of measures to prevent and minimise new bad debts, improve thecredit quality of credit organisations, and promote the role of Vietnam AssetManagement Company (VAMC) in bad debt settlement. This is to ensure that theNPL ratio, including debts sold to VAMC, are maintained at a safe andsustainable level of less than 3 percent of the total outstanding loans.

The country finalised the first phase of bank restructuring in the 2011-15period, which has helped the sector become more secure, and gained the trust ofpeople and investors.

Since the end of 2011, the SBV has dealt with nine weak banks. Some names havedisappeared from the financial market through mergers and acquisitions, such asHabuBank (merged with SHB), Western Bank (merged with PVFC), Tin Nghia Bank andFicomBank (merged with Saigon Commercial Bank-SCB), and DaiABank (mergedwithHDBank).

After five years of restructuring, the central bank has still spotted out baddebts and fragile lenders issues to introduce more effective settlementmeasures. This shows that the process of restructuring the banking system stillrequires a lot of hard work. -VNA