Restructuring the system of credit institutions proceeded for nearly seven years, of which phase I ended in 2015, and phase II was from 2016 to 2020. The process of restructuring the credit institutions system in general and commercial banks, in particular, achieved significant results.
Banks had improved a lot
In 2012, the credit institution system had nine weak banks, then there were some more cases such as Ocean Commercial One Member Limited Liability Bank (OceanBank), DongA Joint Stock Commercial Bank (DongA Bank), etc. So far, only three weak banks and DongABank need to strongly restructure. Many names in the past used to be an ‘obsession’ for not only regulators, but also the market, so far, they had also strived strongly and gave good results like Tien Phong Commercial Joint Stock Bank (TPBank- formerly Tienphongbank), and Sai Gon Joint Stock Commercial Bank (SCB) which consolidated three weak banks SCB, First Joint Stock Commercial Bank (FicomBank) and VietNam Tin Nghia Commercial Joint Stock Bank (TinNghiaBank), National Citizen Bank (NCBformerly Navibank).
Or those banks that once had to bear a weak bank, causing the slowdown of activities, such as Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Housing Bank Of Mekong Delta (MHB), Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) and Southern Commercial Joint Stock Bank (SouthernBank), had also a strong impression on the market with positive results.
Besides, some small banks had come to large banks to voluntarily merge to improve their financial capacity and have a stronger position in the market, such as Great Asia Commercial Joint Stock Bank (DaiA Bank) joining HCM City Development Joint Stock Commercial Bank (HDBank) or Mekong Development Joint Stock Commercial Bank (MDB) into Vietnam Maritime Commercial Joint Stock Bank (Maritime Bank). That Asia Commercial Joint Stock Bank (ACB) used internal resources to rise after the high incident involving former bank leaders were also the undeniable achievements of the restructuring process.
Achievements from accelerating restructuring
After the recent restructuring period, the asset quality of banks had improved; the non-performing loans (NPL) ratio had dropped sharply. At the starting restructuring period, the NPL ratio of both the on-balance sheet and off-balance sheet of the whole system was at double digits, so far, the NPL ratio had dropped deeply. Updated data from the State Bank of Vietnam (SBV) showed that the NPL ratio of the whole credit institution system was only 1.94 percenta deficient level and much lower than the target of three percent. Including the NPL in the balance sheet and the loans sold to the Vietnam Asset Management Company (VAMC), the potential debts and the total NPL would be just over five percent.
NPL had been sharply reduced not only due to the efforts of banks to resolve, but also thanks to VAMC and especially the National Assembly Resolution 42/QH14 on pilot NPL handling. However, the most significant merit was the determination of SBV and the banking industry to make the image of credit institutions in Vietnam more beautiful in the eyes of investors and the market.
After the recent restructuring process, banks’ risk management capacity had improved. There were currently 11 banks meeting Basel II standards, including Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), ACB, Military Commercial Joint Stock Bank (MBMBBank), Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), Vietnam Prosperity Joint-Stock Commercial Bank (VPBank), HCM City Development Joint Stock Commercial Bank (HDBank), Vietnam International Commercial Joint Stock Bank (VIB), Vietnam Maritime JointStock Commercial Bank (MSB), Orient Commercial Joint Stock Bank (OCB) and Tien Phong Commercial Joint Stock Bank (TPBank).
Along with that, the banking business environment was healthy. Discipline in the monetary market, gold market and the banking sector had been revised and improved, contributing to stability and financialmonetary security. Specifically, the gold market was managed by Decree No. 24/2012/ND-CP. There was no longer gold speculation, dollarisation and goldisation of the economy have been pushed back.
The legal framework for monetary and banking activities had been completed as an essential step. In recent years, thanks to the strengthening inspection and supervision, SBV had proactively detected, handled and implemented synchronously and drastically restructuring solutions to deal with shortcomings inherent weaknesses and law violations of credit institutions, which prioritised the application of economic measures to remedy consequences, thoroughly recover assets for banks. With the determination of the whole industry, many significant cases in the banking sector were brought to trial strictly, with sufficient deterrence, cross-ownership relations between banks were also handled almost definitively.
Positive signal of the next stage
According to the Project of Restructuring the system of credit institutions associated with dealing with NPL in the 2016 to 2020 period approved by the prime minister in Decision No.1058/QD-TTg in 2017, one of the whole objectives that the entire industry aimed to was continue restructuring the system of credit institutions with a focus on fundamental and thorough handling of NPL and weak credit institutions suitably. In accordance with the above purpose, market mechanism had to follow prudent principles, ensuring the rights of depositors and maintaining the system stability and safety; to reduce the number of weak credit institutions to have a suitable number of credit institutions with an appropriate scale and reputation, healthy activities, and ensured liquidity.
Over the past three years of implementation, the banking system had received more and more positive results of restructuring activities. It was the revival that was evident in Sacombank, the definite breakthroughs of ACB after the long event, as well as TPBank having changed their flesh.
If 2020 were the last year of the restructuring phase II, 2019 would be considered a pivotal year to open breakthroughs in restructuring activities for three weak banks that have attracted some investors. Some companies like J. Trust Corporation of Japan (pay attention to Vietnam Construction BankCBBank), Maruhan also of Japan were interested in OceanBank; corporations like Srisawad Corporation (Thailand), Clermont (Singapore), and so on, also expressed their intention to participate in restructuring Vietnam’s weak banks.
In addition to restructuring weak banks, phase II restructuring was also carried out simultaneously at all other banks. Therefore, according to analysts, if the above options were actualised, the future of credit institution system restructuring in 2020 would have more bright spots.
A future of Vietnam’s banking industry with one to two regional banks, 15 to 20 banks meeting Basel II standards, the guaranteed system’s financial health, and NPL below three percent were within reach.
