Strengthening the banking sector by World Bank and Switzerland

October 01, 2019 | 17:50
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The World Bank and the State Bank of Vietnam (SBV) today signed a financing agreement for a grant worth $2.2 million provided by the Swiss government to implement the "Vietnam: Strengthening banking sector soundness and development" project.
strengthening the banking sector by world bank and switzerland
The World Bank and Switzerland are lending a helping hand to the Vietnamese banking sector

The project aims to strengthen the soundness and resilience of the banking sector by enhancing the capacity of the SBV to address structural weaknesses in the banking system. Specifically, the World Bank will provide technical assistance to implement reforms laid out under the Banking Restructuring Plan 2016-2020 and the subsequent 2025 Banking Sector Strategy.

“A healthy banking sector, which is the largest segment of Vietnam’s financial system, is fundamental to the country’s sustainable economic growth,” said Ousmane Dione, the World Bank's Country Director for Vietnam. “By bringing in world-class expertise in banking sector development, we hope that we can support SBV in successfully implementing the structural reforms they are committed to deliver.”

The banking sector's challenges include issues of asset quality, weak capitalisation, and regulatory constraints that inhibit further investment in the sector. In addition, Vietnamese banks have higher overheads and provide more for non-performing loans. The sector is being revamped to make it more market-oriented, underpinned by international standards, and ensure stronger financial stability monitoring.

The World Bank will work with the SBV to strengthen the legal and regulatory framework for the banking sector, especially the Law on Credit Institutions and the implementation of National Assembly Resolution No.42/2017/QH14 on settling bad debts. The project will also help the SBV better anticipate and withstand shocks, improve its supervisory capacity in line with international standards and good practices, support the development of a debt market, and build the capacity of Vietnam Asset Management Company to properly manage underperforming assets.

This grant is part of the broader $8 million Strengthening Banking Sector Soundness and Development ProgramME provided by THE Swiss State Secretariat of Economic Affairs (SECO) and administrated by the World Bank.

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