Tho Loc People's Credit Fund put under special supervision

The central bank will implement comprehensively necessary measures to maintain and recover the fund's performance and protect legal interests of depositors.- Photo cafef.vn

This step had been taken as the credit institution was facing insolvency and unaffordability.

According to the central bank, the Tho Loc People's Credit Fund, which is located at the capital's Phuc Tho District, had committed numerous violations in financial management and credit grants, causing a negative impact on the fund's financial status and its business performance.

During the supervision period, besides direct supervision on the fund's daily performance, the central bank will also co-ordinate with relevant authorities at the Phuc Tho District and legal agencies to enhance the retrieval of the fund's non-performing loans through the application of serious punishment on those who deliberately delayed repayment to the fund, causing losses to the State and depositors.

The central bank will also implement comprehensively necessary measures to maintain and recover the fund's performance and protect legal interests of depositors.

Early this year, the Government instructed the central bank to focus on handling ailing credit institutions this year, in which it allowed the central bank to adopt strong measures, including State intervention.

SBV Deputy Governor Nguyen Phuoc Thanh recently also announced that the central bank was considering allowing some ailing financial companies and People's credit funds to declare bankruptcy this year.

According to Thanh, the plan was aimed to gradually inform the market about the bankruptcy in the banking system and warn bank owners to be much more serious in conducting business.

Though there had been some distressed credit institutions in the domestic banking system, the country had not seen any bankruptcy issues for the past years as the central bank was concerned that it could have a negative effect on the entire banking system.

Under a restructuring scheme for the banking system from 2011 to 2015, the number of commercial banks was cut from 42 to 34. Besides restructuring 10 banks through mergers, the central bank also dealt with three ailing banks – Ocean Bank, Viet Nam Construction Bank (VNCB) and Global Petroleum Bank (GPBank) – by acquiring them at zero dong.

Thanh said that transparency in the banking system has improved significantly in the past four years. Cross ownership at banks has been put under control and liquidity of the banking system has been secured.

However, Thanh required banks to take more drastic measures this year to enhance their financial and governance status to meet the rising demands.