In a recent interview granted to the Sai Gon Times, SBV Governor Nguyen Van Binh said the country’s economy scale would be fine with between 14 and 17 domestic commercial banks instead of 30 but putting the plan into effect would take time.
On speculations about mergers and acquisitions (M&A) among medium-sized commercial banks this year, he said the central bank must evaluate every step in the process and the ruling stakeholders must find the M&A necessary and voluntary.
This year, the SBV will keep pinning weak credit institutions, but market watchers doubted there would be an increase in M&A activity between now and 2017.
“It’s quite easy for a credit institution to pay VND 3 trillion (USD 136.36 million) to buy out another one. The important question is whether the buyer would be ready to carry the large bad debt of VND 30 trillion (USD 1.36 billion) (that it would then acquire),” economist Bui Kien Thanh told Ho Chi Minh City Law newspaper.
In a determined attempt to restructure the system and improve its provisions, the SBV on March 18 issued Circular No. 09/2014/TT-NHNN to technically amend Circular No. 02/2013/TT-NHNN on debt classification. Under the new regulation, from April 20, banks may reschedule debt payment deadlines only once and keep intact debt groups until April 1, 2015, under stricter conditions.
Credit institutions and foreign bank branches will have to set aside risk provisions for special bonds issued by the Vietnam Asset Management Company to purchase non-performing loans of credit institutions. However, they may delay making compulsory adjustment to their debt classification results according to results of debt classification by the Credit Information Center (CIC) until December 31, 2014.
The revision was done to make the new debt classification better suit the overall situation while ensuring reasonable efficiency and the central bank would strictly follow the direction to restructure the system.-