Push coming to shove in bank restructuring

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THE VIETNAM INVESTMENT REVIEW

September 18, 2000, Monday

LENGTH: 499 words

HEADLINE: Push coming to shove in bank restructuring, THE VIETNAM INVESTMENT

BYLINE: Xuan Hoa

BODY:

THE ranks of the country's joint stock banks sector could be reduced by half under a State Bank-led reform program.

Joint stock bank mergers and closure are unavoidable if Vietnam's restructuring of its banking and finance industry is to be a success, say officials.

Two bank failures and two mergers have in recent times seen the number of joint stock banks fall from 52 to 48.As part of a 2001-2005 restructuring plan, this total should fall to 25-30 within two years, the officials added. However, the detailed form of the plan may only be available by the month's end, said the State Bank and World Bank. Until it is, there will be no clear official indication of how many joint stock banks will be subject to the program.

The World Bank further said, in an economic update bulletin, that joint stock banks merged last year have been running well in the south.

The plan says those joint stock banks which cannot raise regulated capital levels, or have high overdue debts causing them to be constantly in the red and lossmaking, will be forced into a merger, into surrendering to an acquisition or into handing over their license.

"The focus of this restructuring plan is to build a joint stock banks system of a relatively big size, which is strong and has a transparent financial background," said Pham Thanh Binh, head of the State Bank's Department of Banks. He believed by November 2001 joint stock banks in Hanoi or Ho Chi Minh City ought to have capital of at least VND70 billion ($5 million), in provinces of VND50 billion ($3.57 billion) and in rural areas of about VND5 billion ($357,000).

Pham Thi Tuat, Ministry of Finance Department of Finance and Banking head, said upcoming bankruptcies and disbandments were unavoidable. "We may establish some debt settlement companies in charge of buying and selling overdue debts paving ways for banks to gain capital," she added.

Binh expressed concern overdue debts in the banking sector were increasingly growing. "Raising capital for these banks is their work, not work for the State Bank because the State Bank is not the authority for raising capital for joint stock banks," said Binh.

Statistically, overdue debts accounted for over 10 per cent of the banks' total outstanding debts in 1999. Officially, half of their debts were outstanding.

Generally, some joint stock banks' capital outflows cannot flow effectively due to their lack of capital for mid- and long-term loans and small fixed capital. Their financial capacity does not meet risk compensation requirements. "Clearly, the field has so many players with bad capacity, thus, bank restructuring, especially with joint stock banks, is needed and the industry should not establish any more joint stock banks, at least in 2001-2002," said Tuat.

Improving the supervision of the banking and finance industry is another main objective of the plan. "The industry will also concentrate on overdue and outstanding debts settlement," added Tuat.

LANGUAGE: ENGLISH

COUNTRY: VIETNAM 𦸅IETNAM?92%);?

LOAD-DATE: September 19, 2000