At a transaction office of SCB (Photo: VNA) Michael Kokalari, chief economist at VinaCapital, said there isno potential system consequence from the recent events as evidenced by thefacts that there have not been runs at any other banks in Vietnam, and theinter-bank market has continued to function normally since the SCB news emerged.He also cited Bloomberg news as reporting that the S&P banking team opinedthat the risk from this event is limited to the individual bank and that “we donot expect a material impact on our sovereign credit ratings on Vietnam.”
In a recent report, analysts of VNDirect Securities Corporation alsoheld that recent negative information and fluctuations have put pressure on thebanking system’s liquidity, but the risk to liquidity is not significant formany reasons.
“Firstly, the authorities’ efforts to combatthe ‘dollarisation’ of the economy and increase cashless transactions duringthe period have yielded remarkable results.
“According to our observations, people’sconfidence in the banking system has been strengthened, while the habit ofhoarding cash has decreased remarkably, helping the system's liquidity,” said thereport.
Secondly, macro-stability and the health ofthe current banking system have greatly improved. Currently, nearly 20commercial banks have been recognised as meeting Basel II standards, of whichsix banks have completed all three pillars. In addition, the ratio ofshort-term capital and medium- and long-term loans decreased to 34% on October1 and will decrease to 30% from October 1, 2023.
In the third quarter, many banks continued to record positivebusiness results despite the fluctuations on the financial market. Insiderssaid the banking sector may face some risks in the short term, but thelong-term outlook remains positive.
According to VinaCapital, in the short term, worries over the banking sector maycome from slight margin pressure due to higher funding cost and sloweradjustments in lending rates in part due to the government’s call to limit therate of increase in lending rates.
Besides, perceived risk to asset qualityfrom corporate bonds that are potentially unable to be refinanced, rolled overor re-paid amidst slightly tighter issuance requirements (and possibly shakenconfidence in future bond issuances).
However, VinaCapital is of the view that Vietnam’s bankingsector remains attractive.
“In the long run, the banking sector continues to hold high appeal due to itshigh margins, well controlled asset quality, low penetration rate of mortgageand retail loans, and rising incomes (i.e Vietnam is still at an early stage ofeconomic development, so the country’s banking sector is nowhere close to ahigh maturity stage),” according to the chief economist at VinaCapital./.
VNA
