2015 is seen as the appropriate moment for the banking sector to speed up its restructuring process as it has overcome the most difficult stage; macroeconomic conditions have obtained positive improvements, GDP in Q1/2015 has increased by a YoY rate of 6.03%, inflation has been reduced to a low level, and production and business has clearly recovered.
Over the past few days, a number of Vietnamese commercial banks convened their annual shareholder meetings for 2015 in order to review their operational results for 2014 and set out directives and business strategies for the year. Several small banks concentrated on restructuring schemes, including strategic partnerships with the aim of increasing capital by merging with other banks, in order to extend their operational scale in terms of both finance and networks and to improve their governance capacity. At the shareholder meeting held on April 20th April 2015, the Board of directors of Nam A Bank proposed a scheme to merge Nam A Bank with Sacombank. The National Citizen Bank (NCB) also discussed a merger plan to optimise operational performance for the period 2015 - 2020.
Previously, the SBV promulgated Document No.1607/NHNN-TTGSNH, dated March 18th 2015, accepting in principle plan to merge MDB with MSB with the aim of improving the quality of the bank’s asset and minimizing potential risks.
The merger trend also has been supported by several big commercial banks. At the meeting of Vietinbank shareholders held on April 14th 2015, the board of management of Vietinbank officially proposed to the shareholders a plan to merge with GPBank. This was followed by the BIDV shareholders’ meeting on April 17th 2015, where the BIDV also proposed a plan to merge with the Housing Bank of the Mekong Delta (MHB) – a commercial bank with sound financial capacity and great experience of funding in the high-tech agriculture sector.
2015 is also seen as the appropriate moment for the banking sector to speed up its restructuring process as it has overcome the most difficult stage; macroeconomic conditions have obtained positive improvements, GDP in Q1/2015 has increased by a YoY rate of 6.03%, inflation has been reduced to a low level, and production and business has clearly recovered. In this context, the recovery of the real-estate market is an important basis for supporting the commercial banks to recover overdue loans, hence reducing NPLs to a safe level and with the ability to extend credit in order to boost economic growth.
After initial preparations for the banking restructure process, the liquidity of Vietnamese credit institutions has improved remarkably, the NPL ratio has sharply reduced and the banking sector has gradually gained stability.
Restructuring efforts at several commercial banks have been actively supported by the SBV, especially in NPL resolution and improvements in the legal framework in order to encourage the banking sector towards sustainable development.
In the resolution of NPLs without resorting to the state budget, a scheme to issue special bonds from the Vietnam Asset Management Company (VAMC) has been decided on as the best solution. Hence, the SBV pays close attention to consolidating the authority and operational capacity of VAMC. Until now, the VAMC has purchased total principal outstanding loans of over VND 121 trillion from 39 credit institutions and has recovered VND 4,100 billion. Hence, the NPL ratio of the entire banking sector has been significantly reduced to 3.25%. In 2015, VAMC set the objective of purchasing NPLs of up to VND 70-80 trillion by issuing special bonds. The plan has been already approved by the SBV.
Recently, the Government issued Decree No 43/2015/ND-CP, dated March 31st 2015, revising and supplementing several articles in Decree 53/2013/ND-CP of May 18th 2013. Accordingly, VAMC is allowed to issue bonds to purchase NPLs at the market price in line with the bond-issuance plans approved by the SBV. This is an important move, highlighting the enormous work by the SBV and relevant ministries and agencies in setting up a sound environment to resolve the assets of credit institutions. This new policy has been attracting much interest and has spurred plans by domestic and international investors to become more involved in the debt-purchasing market, contributing to speeding up NPL resolution with more transparency and confidence in the credit institution system.
As well as selling bad debts to VAMC, credit institutions also carry out other measures for NPL resolution, such as accelerating loan collection, making provision for and proactively preventing any potential risk from new bad debts.
It can be said that the objective of gradually reducing the number of credit institutions is being conducted by the SBV in tandem with improvements in the legal environment, with the objective of better governance and management capacity of credit institutions, contributing to increasing the competitiveness of Vietnam's banking sector in the regional and global cause of financial integration.
VMH