Banking sector faces world of change

The director of a commercial joint stock bank said his bank could not take back deposits put on some other banks and some banking entities had almost ceased lending activities.

In its recent notice, the State Bank admitted some banks faced serious liquidity pressures but it confirmed no credit organisation would collapse in the coming period.

Former State Bank governor Dr. Cao Si Kiem said in the long run the central bank should engage in bank classifications and tailoring suitable support policies to each bank. If feeble banks could not grow after receiving support, they must be merged or in the worse case get dissolved.

“At this point in time, it is crucial to keep banks under control to avoid any possible collapse. Under-performing banks will be settled later at a more suitable time,” said a bank executive.

Supportive of the idea, another former State Bank governor Le Duc Thuy said it was important to examine the ‘health’ of each bank, from there recommending suitable drug doses and remedial actions.

“The current time offers opportunities to restructure not only the banking system but the economy as well. However, bank restructuring goals could not be achieved overnight and need smart moves,” said Thuy.

According to financial experts the local market currently accommodates a dozen feeble banks which need to be restructured.

“The State Bank would form a special taskforce team to keep close eyes at illiquid banks and just allow these banks to collect debts, stop lending and liquidate mortgaged assets to partly recover bad debts,” said Thuy.

“In special cases these feeble banks should be put under special supervision. Banks would then willingly hook into mergers without central bank’s compulsory measures,” said the former bank chief.

Central bank’s principles relative to banking sector’s restructuring:

- Developing a banking system with ownership, scope and type diversity
- Making the system safer and healthier
- Merger and consolidation are on a voluntary basis
- Restructuring following diverse models with suitable trajectories.