Banks get into the zone

>> Restructuring of banks is an urgent task for Vietnam

Is it necessary for the State Bank to introduce geographical or customer group zoning to each bank as seen in the previous urban-rural bank operational model?

Banking sector restructuring must make clear how future banking system designs and structures will be. In my view, diverse bank models operating in particular fields and areas should co-exist.

Zoning banks’ operational locations are rational, but how to implement it needs to be carefully considered to avoid rigidity. Banks’ operational areas have geographical features. For instance, banks rendering services to agriculture and rural areas shall aim at rural areas for services provision.

However, just a handful of banks operate in rural areas. Therefore, in the near future we need to uphold banks’ development in these areas to service the country’s agricultural and rural development strategy.

From where should banks’ restructuring processes start, from bigger or smaller ones?

Banks of all sorts need to look at themselves striving for improvements irrespective of their size or to what economic sectors they belong.

What are you comments on recent BIDV move to support liquidation for two small banks? Are these first salvos of the banking sector’s restructuring process?

Bigger banks to prop up smaller ones is necessary to raise public confidence. If banks can later team up, that is good. Some industry insiders said state banks should take on the role BIDV has. State management bodies will weigh up where to go.

The State Bank just enacted Circular 35/2011/TT-NHNN stating that from April 1, 2012 banks’ bad debts will be made public. Is this feasible?

Some said it was a bit hurry to voice that date since non-performing loan standards are divergent at banks. The State Bank’s focal task will be to unify non-performing loan classification standards and risk hedge fund capital contributions among banks.

This is a good trajectory. The future banking system must be transparent. People have the right to know what banks are good to put on their deposits. The interest rates should also be amended depending on each bank’s risk and bad debt features.

The State Bank declared no banks would collapse in the coming period. Does this overprotect feeble banks?

The intention is to keep banks on their feet conveys two ideas. First, the central bank made careful considerations and decided it could entirely manage the situation based on actual conditions.
Second, it is to avoid causing public unease. Feeble banks can hook into merges and acquisitions (M&A) to grow stronger. I saw some banks were ready to climb onboard the M&A ship.