A series of ailing banks will be approved with new restructuring method in 2018, after a long delay.
*M&A: an irresistible solution
After three years of unsuccessful negotiation with VietinBank, PGBank is now looking for another partner to merge.
Though merger document and comprehensive cooperation agreement had been signed by PGBank and Vietinbank since 2015, the deal was not successful.
On April 21, these two banks will organise the annual general meeting (AGM) to ask for opinions of shareholders about the cancellation of this merger deal.
One of the banks that PGBank may merge is Military Bank (MB). According to Luu Trung Thai, CEO of MB, the two sides are negotiating, and no agreement has been approved and signed. However, is it very likely that PGBank will be merged into MB.
Apart from PGBank, two other ailing banks are also negotiating about M&A in this year.
In fact, the settlement of ailing banks tends to slow down in several recent years, as the bad debt burden of these banks is so great, so it is very difficult to seek for a strategic partner.
Among banks that restructured in the first phase, the number of banks that really had breakthrough is only counted on fingertips.
Dr Le Xuan Nghia, an economist said bad debt is still a hot issue of some ailing banks. Therefore, without strengthening the restructuring, after three more years, bad debt may increase again.
“Strengthening restructuring is a big challenge for the state bank. Currently, the National Assembly has approved the revised Law on credit organisations, resolution No.42/2017/QH14 on pilot settlement of bad debt at credit organisations. Therefore, to strengthen the restructuring in the near future, the State Bank must require ailing banks to abide by new legal regulations to accelerate the bad debt settlement. At the same time, there must strengthen the merger and acquisition (M&A)”, recommended Nghia.
Earlier, representative of the State Bank admitted there is a reality that large shareholder of ailing banks delays the restructuring, causing the settlement process to prolong, making it impossible for the State Bank to handle.
However, according to the new regulation, long-lasting ailing banks will go bankrupt. However, the state bank is still working on a restructuring plan towards M&A, seeking for strategic shareholders, self-restructuring, etc. but not forcing any bank to go bankrupt.
*Early intervention into ailing banks
Though no bank is forced to go bankrupt, the State Bank has recently issued a document supplementing early intervention method in banking supervision. Accordingly, ailing banks will always be eyed, and maybe restricted at any time.
According to deputy Governor Nguyen Thi Hong, the revised Law on amendment and supplementation of some articles of the Law on credit organisations taking effect from this year will help the restructuring of ailing banks become more feasible.
Specifically, in 2018, ailing banks faces large recovery opportunities by ways that are suitable with market mechanism on a prudent basis, guaranteeing the interest of depositors and maintaining the system’s stability and safety which had been legalised. However, these banks no longer have basis to delay.
Especially, in this year, banks are also having many opportunities to accelerate the bad debt settlement. The resolution No.42/2017/QH11 has greatly supported the bad debt settlement.
In fact, thanks to this resolution, over the last period, a series of banks such as Agribank, BIDV, Vietinbank, ACB, Sacombank, Techcombank, etc. have earned trillions of dong of bad debt.
Leader of the State Bank said this agency is monitoring, supervising closely the progress and implementation results of restructuring method associated with the bad debt settlement of credit organisations.
Apart from the settlement of ailing banks, the State Bank also asks credit organisations to raise capital, finance, management and governance capacity, and apply capital standards under the regulations of Basel II agreement.
