VietNamNet Bridge - Only commercial banks which have successfully reduced bad debt ratios to below 3 percent of their total outstanding loans will be allowed to open new branches.

 

The bad debts of commercial banks

The Governor of the State Bank (SBV) has released a document which prohibits the granting of licenses to new branches, transaction offices, ATMs, representative offices and new services until credit institutions fulfill their bad debt settlement plans. 

Some bankers complained that with the new document, the central bank has caused difficulties for banks’ operation. Most banks have been moving ahead with plans to expand networks which they set earlier this year. 

A banker noted that the document has ‘barred all the banks’ ways’ of enlarging their networks, as many banks are bogged down in bad debts. Meanwhile, expanding networks is one of the important factors that have helped encourage the banks’ growth.

In reply, a senior official of the SBV’s HCM City Branch said that SBV does not intend to ‘put difficulties’ for banks’ operation, but instead is trying to help banks better control their operations.

The official said that SBV allows commercial banks to open new branches if they have healthy operation and solid fundamentals. Most recently, on November 13, SBV Governor approved the Nam A Bank’s proposal to set up four new transaction offices in Da Nang and Binh Duong Cities. Under the newly granted license, Nam A Bank will be able to fulfill the plan within 12 months.

He said the case of Nam A Bank is a typical example proving that SBV is willing to license new bank branches. 

“Banks just have to satisfy the requirements on capital safety and bad debt ratio to be eligible for applying for opening more branches,” he said.

An analyst commented that in theory, it is not difficult to get licenses for opening new bank branches. However, SBV won’t grant licenses as freely as it did in previous years. 

“The State Bank is now trying to reorganize the banking sector with a number of banks having been cut. It is understandable that it will not let too many bank branches come out into society,” he said.

An SBV official report showed that the bad debt ratio fell to 2.93 percent by the end of September. However, a big problem exists that irrecoverable debt accounted for 57 percent of the bad debts of nine listed banks.

NLD