VietNamNet Bridge – Economic experts have urged the Government to take drastic measures against “cross ownership and manipulating ownership” in local banks to restore order in the country’s financial and banking sector.

Le Xuan Nghia, an advisor to the Prime Minister, said the proposal has been made and will likely be enacted to remedy the situation at several banks where owners are also top executives of economic groups or corporations.

Such people are both creditors and debtors of such banks, he said at the seminar in Hanoi on Wednesday on macroeconomic changes and commercial banking restructuring organized by Bank for Investment and Development of Vietnam.

“We have proposed to the Government that drastic measures be taken to drive such owners out of the banking industry and return them to their own business spheres, especially where ‘manipulating ownership’ is seen,” Nghia said.

Nghia revealed the Prime Minister has backed the proposal, and wanted to single out a few banks for the purpose in the coming time.

“It is imminent that some banks will be restructured this way” so as to avoid long-term damages and short-term shocks in the country’s program to restructure commercial banks, Nghia said. He declined to pinpoint the names of banks to undergo such changes.

Recently, experts have voiced concerns over fishy lending at banks, with the outspoken economist Le Dang Doanh saying some credit institutions have up to 70% of their total outstanding loans put in a single project.

Nghia noted Circular 02 issued by the central bank on debt classification has had its effect date delayed by one more year due to strong resistance from banks, especially those locked in cross ownership.

Nghia admitted to concerns over banking sector safety due to remedial prescriptions, saying such worries may make it difficult to address cross ownership in an all-out fashion.

He however said the central bank is now more determined to apply international norms in the local banking industry, and has readied up to ten banking modernization schemes, such as those on accounting, risk control, capital adequacy ratio, and internal auditing.

The central bank has recently put bad debts in the banking industry at VND139 trillion, or some 4.6% of outstanding loans.

At the seminar on Wednesday, Bui Huy Tho with the central bank’s inspection and supervision division said the amount of bad debts in January-August grew at a much slower pace compared to last year. He added that banks since early last year till end-August had set aside VND90 trillion as risk provisions for bad debt.

Meanwhile, Vietnam Asset Management Company (VAMC) is speeding up purchases of bad debt from banks, targeting to buy VND30-35 trillion of bad debt this year.

Tho said VAMC may buy as much as VND50-60 trillion of bad debt this year, and  that many international corporations have shown interest in acquiring bad debt here in the country.

Source: SGT