This is one of the difficulties mentioned in the report of the State Bank of Vietnam (SBV), which has just been sent to National Assembly deputies.
With the current financial situation of banks for compulsory acquisitions, finding and negotiating with qualified investors to restructure these banks face many difficulties and it depends on the results of negotiations with investors.
Effectively deploying the restructuring scheme of credit institutions is one of the important requirements for the banking industry, mentioned in more than one resolution of the National Assembly.
According to the report, the restructuring of credit institutions achieved important results following the objectives and roadmap set out in the project, creating the stability and safety of the credit institution system.
This result was reflected in the growing financial capacity of credit institution and the increase of charter capital over the years. By the end of March 2019, the charter capital of the whole system reached 578.9 trillion dong, an increase of 0.45 percent compared to the end of 2018 and 13 percent compared to the end of 2017. Equity of the entire system reached 792.6 trillion dong, up 4.2 percent and 20.1 percent compared to the end of 2018 and the end of 2017 respectively.
Basel II standards were focused on implementation to meet international practices for capital safety. Until now, there have been seven commercial banks recognised complying with Basel II by SBV.
The restructuring results were also shown through improved credit quality. Solutions of bad debt handling as well as the control of newly arising bad debts contributed to improving credit quality and reducing bad debt ratio of the credit institution system. In addition, Resolution 42 initially promoted the efficiency, created favourable conditions to handle bad debts and continued to maintain the internal NPL ratio below three percent. At the end of March 2019, it was 2.02 percent.
According to the report, the scale of the credit institution system continued to increase. By the end of March 2019, the total assets of the system reached more than 11 quadrillion dong, up 0.8 percent compared to the end of 2018; mobilising capital from the market one reached 8.5 quadrillion dong, up 2.5 percent compared to 2018.
For banks of compulsory acquisitions and DongA Joint Stock Commercial Bank (DongA Bank stock code: DAB), SBV said that after approving the policy, SBV had urgently taken steps to restructure and handle to ensure the compliance with the provisions of law. Accordingly, SBV conducted an independent audit to assess the financial situation, determined the real value of charter capital and reserved fund as a basis to carry out the next steps in accordance with each specific case.
At the moment, SBV had completed and submitted to the prime minister the plan to transfer and restructure the Ocean Commercial One Member Limited Liability Bank (Ocean Bank) after transferring it to foreign investors. The plan of restructuring Construction Commercial One Member Limited Liability Bank (Construction Bank), Global Petro Sole Member Limited Commercial Bank (GP Bank) and DongA
However, the report also stated that the restructuring of three banks for compulsory acquisitions was a complicated and unprecedented process, closely coordinated and consulted by many ministries and related agencies. With the current financial situation of banks, finding and negociating with qualified investors to restructure these banks face many difficulties and it depends on the results of negotiations with investors.
Another difficulty was also mentioned in the report that the progress of restructuring for some non-bank credit institutions whose owners/shareholders were state-owned corporations was still slow, depending on the content of the overall restructuring plan of the state-owned corporations.
Meanwhile, the prime minister or ministries must approve the restructuring of state-owned corporations. At the same time, many state-owned corporations were still facing financial difficulties and lack of resources to handle losses and restructure these non-bank credit institutions.
In addition, the handling of bad debts of weak organisations was tough. The reason was to deal with bad debts and recover non-profit assets of these credit institutions, it required having a mechanism to allocate losses, reduce financial burdens with financial policies to make credit institutions absorb gradually losses and overcome financial difficulties.
Besides, SBV recognised that it was hard to handle and recover debts and collateral assets of compulsory buying banks because the majority of collateral assets were being distained, related to cases and uncompleted legal documents.
In this report, SBV also raised the issue of improving financial capacity through increasing charter capital of commercial banks with state capital to maintain the leading role of these banks in the financial and monetary market recently had been difficult.
The total amount of capital needed to invest and supplement these banks was quite large to ensure meeting the minimum capital adequacy ratio according to Basel II while State resources could be used to raise capital for these banks was also limited. Therefore, SBV needed to take appropriate measures, including retaining bank profits or stock dividends to increase financial capacity for state-owned commercial banks.
