Restructuring should focus on small banks

State Bank governor Cao Sy Kiem

Restructuring the banking sector is considered to be urgent. What needs to be done?

Strengthening the banking sector must be well-planned, synchronised and systematic.

First of all, we need concrete appraisals to make clear what are the banking sector’s current drawbacks and risks are? How to ensure the system security and what fundamentals are required to help the banking sector get back on track and develop in a sustainable manner and these are also big questions.

Are these banking sector issues current headaches?

That is right. In the past couples of years, Vietnamese banks have developed in leaps and bounds, particularly commercial joint stock banks, whereas the development level of management, technology and human resources quality failed to catch up with such rapid growth.

Part of the banking system are high-risk, mini-banks. Reality shows that bank operations are mostly based on credit activities while other sorts of products and services remain poor and underdeveloped. Therefore, detailed appraisals with adequate figures linking to that practice are important.

How should we begin with banking sector restructuring?

We should start with fledgling smaller banks with a low professional level and high risks.

Emphasis must be placed on banks which are defined as risky in terms of liquidity, ethics, and ones with high lending portions to non-productive sectors.

Restructuring must target enhancing banks’ capital resources, innovating technology, bettering professional and management expertise and ameliorating human resources quality.

What role will supervision hold during the restructuring process?

An effective supervisory mechanism is crucial in restructuring. This will help ensure security for the whole system and put risks at a minimal level. The supervisory mechanism must act as a safe anchor for the whole banking system.

What must we do if there are still feeble banks after these steps are taken?

We need to push those feeble banks into mergers and let them be dismantled to make the system healthy. Banking collapses could threaten the whole banking sector as well as the economy.