According to Deputy Chief Inspector of the SBV’s Inspection and Supervision Agency Nguyen Van Hung, the restructuring plan would closely resolve non-performing loans (NPLs) in a move to sustain the NPL ratio under 3 percent. He also said that under the project, the SBV will also continuously take drastic measures to thoroughly restructure and resolve ailing credit institutions. Preventive measures would be taken to minimise new NPLs and enhance the credit quality of credit institutions in banking system, Mr. Nguyen Van Hung added.
The restructuring plan also mentioned supervisory measures and support policies on commercial banks. Mr. Nguyen Van Hung said this new restructuring plan aims to continuously enhance the strength of Vietnam’s banking system, which has been improved significantly thanks to a strong restructuring scheme from 2011 to 2015.
In 2011, Vietnam’s banking system was unsafe with many credit institutions suffering poor liquidity, weak governance and accelerating NPLs. The foreign exchange market was also very volatile while the government’s foreign exchange reserves remained low. To remove these shortcomings, the SBV developed the Scheme of restructuring credit institutions in the 2011-2015 period as approved by the Government in Decision No.254/QD-TTg of the Prime Minister on March 1st, 2012, to be followed by the SBV issuance of Decision No.734/QD-NHNN on April 18, 2012 on the action plan of the banking sector. The banking system of Vietnam had undergone strong restructuring between 2011 and 2015, which helped it overcome the most difficult period to basically fulfill the tasks in line with the roadmap and plans defined in the restructuring scheme.
Under the restructuring scheme, the number of commercial banks operating in Vietnam was cut from 42 to 34. Besides restructuring 10 banks through mergers, the central bank dealt with three ailing banks - Ocean Bank, Vietnam Construction Bank (VNCB) and Global Petroleum Bank (GPBank) - by acquiring them at zero dong.
Credit institutions have been making their financial condition healthy step by step with a focus on increasing their charter capitals and resolving NPLs. Credit institutions have taken active measures to resolve NPLs by executing their own solutions, rescheduling the existing loans to help enterprises to get access to new loans in service of their production and business, controlling and cutting down operational cost to increase risk provisioning, improving the credit quality, and selling NPLs to the Vietnam Asset Management Company (VAMC). Consequently, NPLs of credit institutions have been gradually resolved, resulting in improved operations of credit institutions. By end of June, 2016, NPL ratio of whole banking system was 2.58% lower than 3% targeted by the Government.
The five year restructuring scheme has helped Vietnam’s banking system increasingly stable with the gradual reduction of systemic instability. The solvency of credit institutions has been improved; and the state assets and deposits of people have been very safe with adequate and timely repayment, including several weak joint-stock commercial banks to be restructured.
