In the ‘World Economic Prospects 2020 Report’ recently released by the International Monetary Fund (IMF), the global economic growth in 2020 was forecast at three percent, which was much lower than the number in global financial crisis in 2008 and also fell more than six percentage points compared to the IMF forecast made in October 2019 and January 2020.
The Covid-19 epidemic had crept into every corner of the global economy, dragging down revenues, disrupting supply chains, which could put the world economy into recession. But from another perspective, difficulties were also the time when organisations looked back to themselves to be able to restructure strongly. IMF officials said that the banking systems of some countries might need to be restructured if their economies were seriously affected by the prolonged disruption due to Covid-19.
In Vietnam banking system, experts believed that Covid-19 helped banks learn how to adapt and restructure, not to cope with temporary situations but to shape how to work more effectively in the future. Talking to the reporter, a financial expert said that the difficulties of the economy would reveal the challenges of each specific industry, including the bank. The screening would also be more advanced. Banks with good health, after experiencing the crisis, would stand firm, and vice versa. In the context of difficult circumstances, finding solutions to continue developing were opportunities to see which banks could cope with risks. Shortly, it was not possible to say in advance what the disease situation would be like. Still, if it continued to be complicated, the effects would be reflected on the bank’s balance sheet, liquidity problems, bad debts, profitability.
This could be seen as a test of the bank, a thermometer to see where the fever was located, to find the cause to be able to assess and provide close solutions to restructure accordingly accurately, this person shared.
Tobias Adrian, director of IMF’s money and capital market division, stated that current banks could withstand the adverse effects of Covid-19 epidemic, but financial conditions could become even worse. The bank was still facing pressure on capital to meet Basel II standards. Because there were still many banks that did not meet this standard. Experts said that the establishment of early warning models of factors from system risks would help the financial system to withstand the shocks brought about by these risks. Banks themselves must also review their policies and procedures to change to suit the economic situation, especially when the global economy was likely to fall into recession due to Covid-19 epidemic. That was also the time to apply standards on corporate governance and risk management in the most proper way.
According to experts, the adjustment, review of operational processes, governance of each bank was not merely to help banks have more resilience, improve financial capacity. Healthy banks meant that the ability to support and share with businesses in difficulties also increased.
With that spirit, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)’s representative said that in 2020, the bank would focus on making four strategic breakthroughs and three focus points in business restructuring. Accordingly, four important advances included innovation of growth model and redesigning business operations; completing the system of mechanisms and policies (internal governance mechanisms and mechanisms and procedures for customers); improving the quality of human resources, focusing on the capacity to adapt to digital banking; completing and upgrading the information technology system, deploy digital banking.
With three focus on business restructuring, Vietcombank would gradually reduce the credit growth rate, associated with sustainable, effective credit restructuring. This bank would increase the proportion of retail balance with the Retail Banking Model Transformation project as a foundation, increasing the percentage of collaterals in the total balance, at the same time, increasing the portion of non-credit income with the focus on services and capital investment; restructure capital portfolio in the direction of efficiency and sustainability.
Tien Phong Commercial Joint Stock Bank (TPBank) general director Nguyen Hung also acknowledged, considering the reduction of unnecessary spending of each bank would be the most practical way to support customers. For example, on support for customers affected by Covid-19, Do Tuan Anh, vice Chair of Vietnam Technological and Commercial Joint-Stock Bank (Techcombank) shared that the bank had immediately started working with customer groups in customer segments, then filtered out parts of customers that were seriously affected, customers with low impact, customers who requested debt structure support, interest rate exemption and reduction, and so on. The bank would go to each group of customers to assess the impact, not mass. That was an opportunity for banks to adapt in case of facing objective risks while still ensuring the protection of uninterrupted resources, but able to support customers.
It was clear that Covid-19 also made banks change the way they worked so that they did not need to focus on a large number of staff, but still ensured the efficiency of the work set out. Most banks in this period had implemented operational solutions for officials and employees to take turns, to work online. At the same time, banks also enhanced the deployment of products and services with incentive programmes for customers to do online transactions.
Can Van Luc realised that banks were implementing many solutions, including promoting the digitisation of banks. In the current epidemic phase, the digital banking strategy would be more and more focused. Because of the restrictions on direct transactions but opening up opportunities for banks to expand and reach out to more customers through digital channels, this was an indispensable requirement and the goal that modern banks went towards.
