Credit growth targets under microscope

The central bank recently unveiled credit growth targets applied to four bank groups in 2012. Accordingly, group 3 banks have a maximum credit growth of 8 per cent while group 4 of weak banks are not allowed credit growth. Economists, however, assumed the State Bank needed to quickly re-arrange these banks.

Banking expert Nguyen Tri Hieu said the move reflected central bank intentions to force under-performing banks to concentrate resources for a shake-up and tighten control of banks’ capital flows.

“The profitability of banks belonging to these two groups is very low and reactions of their shareholders and customers are not predictable,” said Hieu.

Hieu added in the world practices a 8 per cent credit growth was not a minor growth target, however, it would create a shock in Vietnam since many local banks saw their credit growing 30-40 per cent or even more per year in previous years.

“Low and zero credit growth to group 3 and group 4 banks could trigger negative implications. But, forcing those banks to restructure is a wise move,” Hieu asserted.

Economist Bui Kien Thanh assumed addressing feeble banks through mergers or consolidation would now be an urgent task after the State Bank finalised classifying banks into specific groups.

In fact the State Bank did not make public its bank classification list and banks would have their assigned 2012 credit growth targets given by central bank within the first quarter of the year. VPBank was given a 17 per cent maximum credit growth target and Nam A Bank got a 15 per cent growth target.

Hieu said the banking authority move to not declare banks’ classification was reasonable since banking was a sensitive field. “However, in the long run it is necessary to air bank classification criteria and each year make public the rating based on a set scoring system,” said Hieu.

“Bank classifications should not be withheld as people have the right to know [the information] to decide on who will keep their money,” said Thanh.