Banking on some quick solutions

Banking sector restructuring is one of government’s top priorities in 2012. State Bank deputy governor Nguyen Dong Tien shines further light on how banking authorities will handle the task in 2012.

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In light of the State Bank’s Directive 01/CT-NHNN of February 13, 2012 group IV banks are not allowed to see credit growth in 2012. How will they fare?

Around 10 credit institutions face collapse. They need to be re-arranged to better manage debts and evolve in a healthy manner. In fact, their total credit may not grow, they can still operate raising and lending activities in a safer manner.

What are the criteria behind banks’ credit growth classification?

There are multiple criteria like capital scale, governance capacity, risk management, collateral quality, asset value and obedience of central bank policies. Group I consists of healthy banks so they are given a maximal credit growth of 17 per cent per year in 2012. Group II with average banks, group III with below average banks and group IV with weak banks are given corresponding maximal credit growth targets of 15 per cent, 8 per cent and zero per cent this year.

The State Bank will not unveil the classified bank list but it will inform each bank of their allocated credit growth target. In respect to foreign banks with chartered capital hikes last year, they will be allowed a maximal credit growth tantamount to charter capital amount in 2012.

In doing this, central bank hopes total credit growth of the whole country will be around 15-17 per cent this year. After six months of implementation, the State Bank will adjust the rate allocated to credit institutions to suit changes in monetary and credit situation as well as banking activities at that time.

State Bank chief Nguyen Van Binh said several banks would be subject to mergers and acquisitions in the second quarter of 2012. What about the preparations?

The process is now underway. To make the target come true a number of legal issues need to be addressed such as making asset appraisals or coordinating bank efforts.
The matter when those banks will be restructured will be aired later.

In 2011, the State Bank enacted Circular 35/2011/TT-NHNN, effective from April 1, 2012 regulating that information relative to banks’ mergers and acquisitions, bad debts and violations will be made public. Will the central bank make banks’ bad debts public in the coming period?
Making public banks’ business criteria is part of the roadmap to ensure banks’ transparent information. It also depends on bank actual performance.

How will the State Bank support stock and property market in 2012?

Directive 01/CT-NHNN focuses on expediting measures to put the macro-economy on a stable footing and concentrating capital sources into production and export. Hence, securities trading and property will continue to be areas not specified as priority by the government and the State Bank in 2012. However, the State Bank will make suitable adjustments in the field.
Credit growth to non-productive areas is capped at 16 per cent in 2012.
 

Thuy Lien (vir.com.vn)