VietNamNet Bridge - The State Bank of Vietnam (SBV) has been asked by electors from Long An province to reconsider or review the opening of a number of commercial banks there several years ago. A high bad debt ratio in recent years was the reason behind the request.

 

 

The National Assembly’s People’s Aspirations Committee has forwarded the inquiries from the voters in Long An province to SBV, which was asked to clarify the relation between the opening of the banks and bad debt ratio.

In the reply dated July 30, SBV said the banks’ bad debt had been caused by many reasons, including the opening of many joint-stock commercial banks in the period when credit grew rapidly, while bank corporate governance was still weak.

In 2005-2008, SBV agreed to shift 13 rural joint-stock commercial banks into urban joint stock commercial banks.

At that time, some experts warned the fast transition from rural to urban banks and the quick increase of chartered capital within a short time could lead to uncertainties in the banking system later, including bad debt.

In a research report from the National Assembly’s Economics Committee in 2012, Dinh Tuan Minh, a finance expert, said that the fast transition of the 13 banks and the hot development of the banks had influenced the entire banking system.

The 13 banks, when they had rural status, had chartered capital of between tens and hundreds of billions of dong. 

Therefore, they had to hurry to call for more investments and issue additional shares to raise capital to VND3 trillion by 2011 as stipulated by law. They had to increase legal capital by 10-20 times within five years.

The rapid development of the banks caused the banks to increase their assets at any cost to correspond with their added stockholder equity. S

Since the banks’ corporate governance could not be improved in accordance with the expanded scale of operation, the credit quality of the banks began to show problems.

An analyst said that the bankers, who were put under pressure to increase their capital, had to seek capital from many different sources, including state-owned conglomerates and private businesses. 

The new capital contributors have been trying to control the banks and turn the banks into the instrument to provide loans to them.

SBV, in its written document to voters from Long An, emphasized that it is implementing the plan to restructure commercial banks and settle bad debts.

The number of credit institutions in the system was cut by 15 institutions between 2011 and June 2015. 

TBKTVN