2020 would be the time when credit institutions closed the roadmap for restructuring phase two from 2016 to 2020 as well as met the Basel II standards. Credit institutions had been trying to run to the finish line.
Differentiated with a bright appearance
In the report of banking performance in the first six months of 2019, the State Bank of Vietnam (SBV) said that one of the critical tasks of 2019 was that the restructuring of credit institutions continued to be promoted.
According to the report, the restructuring results of credit institutions had created stability, and safety of the system of credit institutions, which were maintained in many aspects, such as the strengthening of credit institutions’s financial capacity, the gradual increase of chartered capital rate over the years; the continuous expansion of the scale of credit institutions system. Additionally, the management capacity, operational control, internal audit and risk management of credit institutions had been gradually improved to approach international practices. Also, the transparency in the operation of the credit institutions system was enhanced in advanced.
Notably, non-performing loans (NPL) had good handling results, helping the banking system to bear the burden, achieving better asset quality, operating more effectively, making the entire system covered with a flourishing appearance.
However, the division also became apparent.
Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) was currently leading the system. The rank was followed by the emergence of the top private commercial banks with high profit and growth such as Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), Military Commercial Joint Stock Bank (MBBank), Asia Commercial Joint Stock Bank (ACB), HCM City Development Joint Stock Commercial Bank (HDBank) or breakthrough business strategies like HDBank.
The ‘lower’ banks, temporarily staying on the Unlisted Public Company Market (UPCoM) or still on the Over The Counter Market (OTC), was unlisted, so it was necessary to continue to push for significant changes or restructures with the resources to be ‘upgraded’ on divergence flow of credit institutions.
There was still a need for more motivation from restructuring
Despite the bright appearance and remarkable achievements, Vietnam’s credit institution system before 2020 still needs further improvement.
Firstly, it was the one-member commercial banks bought zero dong by SBV was pouring capital for restructuring.
Secondly, credit institutions under special control had a long time to restructure but ineffectively, need a change, and a strong push to increase resources and contribute to accelerate the molting process. Then they would soon return to operate effectively, benefit the market as well as contribute to safety and stability for the whole system.
Thirdly, before the appointment points at risk of being delayed by the rest of the credit institutions in the market (Basel II standards, listing, and so on), any organisations that were moving slowly need to be aware of both treading and planning to keep the durability, accelerating to the finish line.
It is high time to reform Vietnam’s banking system. Moreover, to become a robust, globally integrated system, the Vietnam banking system should not be evaluated by only the leading group of which the capacity had been confirmed.
It was essential to apply stronger merger, acquisition in case of necessity, or to take drastic measures for all credit institutions to change together and finish 2020 with the basic plan to complete phase one of restructuring roadblock.
