Experience desired for banking reform

December 26, 2023 | 13:00
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Vietnam’s banking sector, amid urgent restructuring led by key players and government efforts, is confronting unique challenges due to limited restructuring experience and the complexity of securing investors.
Experience desired for banking reform
More restructuring plans for banks are set to be unveiled by the SBV, photo Le Toan

Vietnamese Prime Minister Pham Minh Chinh last week engaged with Masahiko Kato, chairman of Japan’s Mizuho Bank, along with other top regional executives of the bank. The agenda centred on Mizuho’s proposed involvement in Vietcombank’s upcoming private equity offering and its broader strategic intentions in Vietnam.

“Our participation in Vietcombank’s share issuance and the mandated takeover of a financial institution in need signifies our confidence in Vietnam’s economic stability and growth potential,” Kato said,

This move underscores Mizuho’s strategy to deepen its footprint in the Vietnamese banking sector. Mizuho also expressed an eagerness to finance key national projects, particularly in green energy transition.

“We are looking forward to contributing to Vietnam’s journey towards sustainable development, particularly through green bond and carbon credit market initiatives,” added Kato.

PM Chinh stated, “The Vietnamese government recognises Mizuho’s proposals as valuable contributions to our nation’s financial and economic landscape, and we will facilitate the necessary processes promptly.”

He also encouraged Mizuho’s involvement in restructuring local banks and in supporting the government’s objective to develop social housing for the underprivileged.

Mizuho’s significant investment in Vietcombank, initiated in 2011 with the purchase of a 15 per cent stake valued at $567.3 million, is reinforcing its commitment to Vietnam’s financial sector.

Also last week, the government commissioned Deputy Prime Minister Le Minh Khai to oversee the restructuring of at least two struggling banks.

This initiative, part of the government’s latest resolution from its regular November meeting, aims to invigorate key economic drivers such as investment, consumption, and exports, aligning with the nation’s strategic development objectives.

“The government’s focus is on revitalising these critical financial institutions to ensure robust economic growth and stability,” stated DPM Khai.

Under his guidance, the State Bank of Vietnam (SBV), along with the Committee for Management of State Capital at Enterprises, will expedite the restructuring processes.

This intervention comes at a crucial time, as banks currently under special regulatory scrutiny include Construction Bank, OceanBank, GPBank, DongA Bank, and Saigon Commercial Bank.

Earlier in May, the SBV received approval for the compulsory acquisition of four of these banks, indicating a decisive approach towards financial stability. However, the State Audit Office of Vietnam has flagged concerns over the slow pace of these reforms, noting that the issue has been unresolved since 2015.

Nguyen Thi Hong, Governor of the SBV, also shed light on the significant challenges involved in restructuring the nation’s weak banks, particularly against the backdrop of the pandemic and global economic fluctuations.

“The task of bank restructuring, always complex, is now compounded by the current economic context influenced by the pandemic and international instabilities,” she said. “We are navigating uncharted waters here. The limited experience in handling complex bank restructuring within our teams adds layers of complexity.”

Securing voluntary investors for the restructuring process has been a particularly strenuous endeavour.

“Navigating the multi-tiered approval process necessary for restructuring these institutions adds to the complexity of the task at hand,” Hong explained.

She disclosed that the central bank is close to finalising a comprehensive restructuring plan, which will subsequently be presented for the necessary approvals.

Some commercial banks are also indicating their readiness to engage in the banking restructuring process. In mid-October, Pham Thi Nhung, deputy CEO of VPBank, articulated the bank’s strategic readiness to participate in the restructuring of Vietnam’s banking system.

“VPBank is set to assume responsibility for a credit institution designated for compulsory transfer. We have meticulously prepared the resources required for this significant undertaking,” she said. “Our primary objective after the transfer will be the swift and efficient restructuring of the acquired institution. We are fully committed to ensuring a seamless integration process.”

Meanwhile, MB is spearheading the compulsory transfer of a weak bank, a process initiated in 2022 and set for completion by early 2024. “After obtaining shareholder approval in 2022, we’re engaged in valuing the bank for transfer, expecting to conclude by late 2023 or early 2024,” Pham Nhu Anh, CEO of MB, stated at its AGM in May.

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By Luu Huong

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