SGGP
The handling of weak banks is in progress, and even if the cooperation between banks is successful, it will take many years to complete the transition process. However, with the participation of large, potential banks, especially with the participation of the Government, it is expected to create a breakthrough in the restructuring of the banking system in the coming time.
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| Construction Bank is subject to restructuring. Photo: MINH HUY |
Multiple bank transfers required
According to the Government's Project "Restructuring the system of credit institutions associated with handling bad debts in the period 2021-2025", by 2025, the banking industry must fundamentally handle weak banks and not create new weak banks.
There are currently 4 weak commercial banks (CBs) subject to restructuring, including: DongA Bank (DongABank), Construction Bank (CB), Ocean Bank (OceanBank), Global Petroleum Bank (GPBank). The State Bank of Vietnam (SBV) informed that the competent authority has approved the compulsory transfer policy for these 4 weak banks. By October 2022, the SBV will also put Saigon Commercial Joint Stock Bank (SCB) under special control; currently implementing the procedures and processes prescribed by law on the overall assessment of the current situation and restructuring policy to have a basis for developing a restructuring plan for this bank, reporting to the competent authority for approval. Up to now, people's deposits at SCB are still protected, with the spirit of ensuring the legitimate rights of depositors.
Sharing with the press in early June 2023, CB leaders said that it is expected that in 6 months, Vietnam Joint Stock Commercial Bank for Foreign Trade (Vietcombank) will become the "parent bank" of CB. After more than 8 years of restructuring, 2022 is the first year that CB has had its business plan approved by the State Bank and has completed 100% of its targets. In a related development, at Vietcombank's General Meeting of Shareholders in late April 2023, Mr. Pham Quang Dung, Chairman of Vietcombank's Board of Directors, also said that the bank will receive the mandatory transfer of a weak credit institution. This is part of the responsibility but also an opportunity for Vietcombank. With the support and facilitation from the Government, the State Bank will create new momentum for the bank and more development opportunities in the coming time. In fact, since March 2015, CB has officially become a 100% state-owned bank, with comprehensive support from Vietcombank. Vietcombank has also sent staff to directly manage and operate CB since then.
Military Bank (MB), Vietnam Prosperity Joint Stock Commercial Bank (VPBank) and Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank) also submitted to shareholders for approval the merger of another credit institution at the recent 2023 General Meeting of Shareholders. Accordingly, Mr. Pham Nhu Anh, Permanent Deputy General Director of MB, confirmed that he is carrying out the procedure for the valuation of the compulsory transfer bank. It is expected that the valuation will be completed by the end of this year or early next year, and MB can implement the compulsory transfer. With quality resources and experience in successfully implementing a number of restructuring plans, MB expects to successfully implement this plan, thereby taking advantage of support to accelerate development, contributing to the early completion of strategic goals. The identity of the transferee bank is most likely OceanBank. Because in fact, MB has participated in supporting OceanBank's business for nearly 2 years now. At the 2023 General Meeting of Shareholders, VPBank's leaders also revealed that this bank is one of four banks participating in the restructuring of weak banks and receiving compulsory transfers. VPBank is in the process of researching and proposing to the authorities. HDBank's 2023 General Meeting of Shareholders also approved that this year it will continue to participate in the restructuring of credit institutions, including receiving compulsory transfers of a commercial bank.
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Transaction at Joint Stock Commercial Bank for Foreign Trade of Vietnam. Photo: MINH HUY |
Resolutely implement
In early 2023, the Governor of the State Bank of Vietnam issued Directive 01 directing a number of key tasks of the banking sector in 2023. One of the key tasks identified is: resolutely implementing the Project "Restructuring the system of credit institutions associated with handling bad debts in the period 2021-2025"; focusing on directing competent authorities on restructuring and handling weak credit institutions.
In Resolution No. 31/NQ-CP, the Government also requested the State Bank to focus on effectively handling weak commercial banks, ensuring liquidity and safety of the system, focusing on handling bad debts and limiting new bad debts. After directing all levels, the Government also affirmed that this year it will focus on handling weak banks to ensure stable operations and support these banks to gradually recover. In March, the Prime Minister issued Decision 213/QD-TTg to establish a Steering Committee for restructuring the system of credit institutions, and the Prime Minister holds the position of Head of the Steering Committee. This is a special event, determining the importance of restructuring the banking system. With the participation of large commercial banks with management capacity and experience in restructuring previous commercial banks, combined with the support of the mechanism and the direct participation and direction of the Prime Minister, there will be an opportunity to completely handle weak banks.
Speaking at the National Assembly forum on June 1, 2023, SBV Governor Nguyen Thi Hong acknowledged that the restructuring of weak banks is a persistent and difficult issue to handle. Restructuring a weak bank under normal conditions is already very difficult, and under current difficult conditions it is even more difficult. However, the Government and the Prime Minister have resolutely implemented it. Right from the moment he took office, the Prime Minister met with the banking sector and requested drastic measures to restructure. Up to now, the handling of weak banks has been submitted to competent authorities for approval. Currently, the SBV and ministries and branches under the direction of the Prime Minister are resolutely implementing the steps before approving the detailed project.
Dr. CAN VAN LUC, Member of the National Monetary and Financial Policy Advisory Council:
Bank mergers are a part of the Government's general policy on restructuring the economy and enterprises, which has been identified in recent years. And dealing with weak banks is one of the key tasks of the State Bank in this period, because letting weak banks go bankrupt will cause a lot of disruption for depositors. Therefore, the merger option will be better than letting banks go bankrupt. In addition, merging weak banks will contribute to the health of the banking market, towards helping banking services in supporting the economy and society better in a comprehensive way. Promoting the restructuring of credit institutions is considered a policy decision for a healthy economy. Therefore, in addition to dealing with weak banks, banks need to have breakthroughs in policies as well as strengthen the quality of small and medium-sized banks.
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