In a time when the economy and enterprises were facing many difficulties, banks was considered as one of the ministries and branches to quickly join with synchronous solutions from management agencies to banks to effectively solve difficulties for customers.
According to the report of the State Bank of Vietnam (SBV), from January 23 to March 28, credit institutions (CI) had initially restructured the repayment period, keeping the debt group for over 12,000 customers with a debt of 13.5 trillion dong. Along with that, CI had been considering reducing interest for nearly 36,000 customers with a loan balance of over 91 trillion dong. In the credit support package of 285 trillion dong, the lending interest rate was lower than the normal interest rate from 0.5 percent to three percent per year that banks committed, also lent new loans to 47,000 customers with the value reached nearly 80 trillion dong.
In particular, in response to the call of SBV, from April 1, a series of banks continued to announce support credit packages as well as sharply reduce of lending rates by 4.5 percent per year. Particularly, four state-owned commercial banks, including Vietnam Bank for Agriculture and Rural Development (Agribank), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), also pledged to deeply reduce lending rates to 2.5 percent per year. Vietcombank Chair, Nghiem Xuan Thanh, said that the bank had activated a 30 trillion dong credit package with loan interest rates reduced by two percent to 2.5 percent compared to the previous period. In particular, the lending interest rate for customers producing essential goods was reduced to a maximum of only 4.5 percent to five percent per year.
So far, more than 20 banks (accounting for 75 percent of the country’s credit market share) had agreed to reduce their lending rates by two percent to three percent compared to the time before the service to support customers. In order to sharply cut interest rates, customer service fees, banks had reduced operating costs, cut salaries, bonuses from senior leaders to employees to have the best financial resources to support customer. For example, Saigon Hanoi Commercial Joint Stock Bank (SHB)’s general director Nguyen Van Le said, in addition to reducing operating costs with a minimum reduction of 10%, the leaders of the Board of directors, Board of Management and senior management of the bank had voluntarily reduce salary by 50 percent until the announcement of the end of the epidemic. At lower levels of management, the reduction was between 10 percent to 30 percent depending on income level.
The leader of a bank shared, the board of directors determined that he would put all human and material resources to help customers overcome this difficult period most effectively. According to calculations by this bank leader, in order to focus on supporting businesses, the bank accepted to sharply reduce profits. BIDV estimated that reducing loan interest would reduce the bank’s income by 3 trillion dong. SHB leaders said the bank adjusted its business plan, reduced profits in 2020 with a minimum reduction of 1 trillion dong.
Capital for state-owned commercial banks should be increased
A member of the National Financial, Monetary Policy Advisory Council assessed that banking was a fast and effective field in recent years. The solutions that banks offered had targeted the right subjects such as lowering interest rates, extending and postponing debts for both corporate and individual customers that has created cash flow liquidity so that they could survive in this period. However, banks were also businesses, so they needed the sharing of ministries and agencies, especially the mechanism of fairness, such as tax issues. At the recent meeting with the leaders of the SBV, some bank leaders proposed that banks were nervous to support customers, but banks must also be strong enough to fulfill this task, so it was necessary to have support policies.
The good news was that after many recommendations, the Ministry of Finance had recently added credit institutions to the group of beneficiaries of the tax extension policy. However, there was still a point that experts were concerned about increasing capital for state-owned commercial banks. The timely addition of chartered capital helped state-owned commercial banks to support the economy more in the current context, because if the capital were not be raised, the ability to provide credit of these banks would also be limited for fear of hitting capital adequacy ratio (CAR).
And importantly, the increase in capital or in other words, reinforcing the cushion for banks to be strong to ensure liquidity and safety of the banking system from being ‘rubbed’ before the impacts. Especially, at this time, according to Vo Tri Thanh, liquidity was more important than ever because the currency turnover was weakening. When a good economy turned one coin, everyone had money. And then, despite having 1.5 dong, the money did not turn around so everyone would see a shortage of money. Therefore, ensuring liquidity for banks was extremely important, Vo Tri Thanh stressed.
Having the same opinion, a banking expert further analysed, at this time, the cash flow stuck from bad debt. Explaining why the debt was not bad but the money was slowly returning to the bank, not even returning to the bank, he said, since Circular 01 came into effect with a clear legal framework, banks had started debt restructuring activities for customers without debt group transfer. However, in essence, the cash flow at the bank was interrupted because the loans had not come back as scheduled, so bank’s source balance would be more difficult.
The losses and difficulties of the bank would not be immediately expressed due to policy lag. But when using many financial support measures, if there were no reinforcement solution, the capital cushion of big banks would be thinner, affecting operation safety. Therefore, the timely addition of equity to state-owned commercial banks, according to Nguyen Duc Do, was necessary and should allow these banks to keep a portion of profits to increase capital.
Agreeing to put capital increase into the upcoming priority target of the government, but according to Vo Tri Thanh, adjusting the level and dosage to suit the current budget situation should also be considered. Nguyen Tri Hieu also recommended expanding the economic support package to a larger scale, including the content of increasing capital for state-owned commercial banks. Through the epidemic of economic crisis, banks of which capital was great would maintain their existence in a sustainable way, and banks that lack capital would be very vulnerable, Hieu expressed his concern.
