New face of the banking system

Friday, 2016-02-05 17:09:28
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After four years of restructuring, Vietnam has a safer banking system (photo: Ngoc Chau)
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NDO - After four years of restructuring, the banking system has, for the most part, achieved its goals of restructuring and non-performing loan settlement, showing a new face of the Vietnam banking system which is streamlined, safe and disciplined.

Doubled success

The system of credit institutions faced enormous difficulties with liquidity strains in 2011 due to effects of the global financial crisis, world economic recession and weaknesses of the national economy since 2008, in addition to the unstable macroeconomy and stagnant real estate and stock market.

After nearly four-years of the project on restructuring the credit institutions system in the 2011-2015 period in the context of many unfavourable factors, the results of banking restructuring and settlement of non-performing loans are on the right track.

Nineteen credit institutions and branches of foreign banks have been merged, acquired or dissolved. The rate of non-performing loans was reduced to 2.72% by the end of November 2015 from 17.2% in September 2012.

Annual lending interest rates were slashed from over 20% per year to 7-9% per year in addition to a stabilised gold market and exchange rate. Banking credit has been allocated more reasonably in accordance with the reform and socio-economic development orientations.

The results of banking restructuring have also created motivation for corporate, market and investment restructuring. Economist, Dr.Vo Tri Thanh said that the whole process of banking restructuring has basically fulfilled the set targets and followed the roadmap.

Sharing the same view with Thanh, Deputy Chairman of the National Assembly Economic Committee Nguyen Duc Kien emphasised that more than 90 million Vietnamese people can now feel secure about a safer banking system which is a 'doubled success' as said by Dr.Le Tham Duong, Head of the Financial Department under the Banking University of Ho Chi Minh City.

Non-performing loans are being cleared

The banking sector has settled roughly VND463 trillion (US$20.84 billion) in non-performing loans, equivalent to 99.6% of the total non-performing loans estimated in September 2012, reducing the rate of non-performing loans from 17.2% in September 2012 to 2.72% in November 2015.

With the full application of the new standards on loan classification, since the first quarter of 2015 two statistics on non-performing loans have no longer existed (the statistics according to reports by credit institutions and the statistics according to the supervision result by the State Bank) and information on non-performing loans is now more transparent.

Along with measures to restructure credit institutions, the results of non-performing loans settlement have contributed significantly to improving liquidity, lowering interest rates, and boosting credit growth to support production, business activities and economic growth, said Deputy Chairman of the National Financial Supervisory Committee Truong Van Phuoc.

The results of restructuring credit institutions in the 2011-2015 period have also laid an important foundation for more sustainable development of the banking system in the future.

All measures to restructure credit institutions, particularly the interference in or acquisition of weak banks, have been implemented in accordance with law in order to protect the money and property of the State and the people as well as ensuring the safety of the banking system.

The restructuring of credit institutions has also supported the restructuring of enterprises, financial market and investment, helping to promote economic growth and stabilise the macroeconomy. The achieved results have explained why financial organisations and international credit rating organisations highly valued Vietnam's efforts in renewing its banking system.