The central bank on Friday held an online conference to prepare for the implementation of the scheme to settle non-performing loans (NPL) and restructure credit institutions in the 2016-20 period.

Addressing the discussion, State Bank of Viet Nam (SBV) Governor Le Minh Hung talked about the implications of the National Assembly resolution on NPL settlement approved last month and Prime Minister Nguyen Xuan Phuc’s Decision 1058/QD-TTg on credit institutions restructuring in the 2016-20 period issued on Wednesday, which gave the scheme the green light.

Besides bad debt settlement, the scheme lists objectives, principles, solutions and itineraries to restructure the system of credit institutions in the period.

To implement it, Hung has asked all credit institutions to map out their own restructuring plans and submit it to relevant management agencies for approval.

In their restructuring plans, institutions have to look at and assess their own finances, corporate governance, shareholders and charter capital ownership status. They have to also detail the objectives, orientations and solutions proposed for their restructuring and for bad debt settlement for each year.

Hung has instructed all credit institutions to set up steering committees focused on these issues so that they can spot and report hurdles in the implementation process to the central bank without any delay.

As the process of restructuring credit institutions and settling bad debts is linked to many ministries, agencies and organisations, Hung said he expected support and co-operation from all concerned so that the scheme can be implemented successfully.

Under the scheme, all credit institutions will be restructured. The SBV will categorise solutions to restructure credit institutions into groups based on the type of credit institution. The country’s system of credit institutions currently includes State-owned banks, joint stock banks, finance companies, financial leasing companies, foreign credit institutions, co-operative banks, People’s credit funds and microfinance institutions.

Methods and measures to restructure credit institutions will be applied in accordance with the specific nature of each institution and in line with the market mechanism based on caution, ensuring the rights of depositors, and maintaining stability and system security under the Government’s policies on restructuring the financial market.

The disposal of bad debts in the next few years must be linked to the implementation of measures to prevent and minimise new bad debts, improve the credit quality of credit organisations, and promote the role of Viet Nam Asset Management Company (VAMC) in bad debt settlement. This is to ensure that the NPL ratio, including debts sold to VAMC, are maintained at a safe and sustainable level of less than 3 per cent of the total outstanding loans.

The country finalised the first phase of bank restructuring in the 2011-15 period, which has helped the sector become more secure, and gained the trust of people and investors.

Since the end of 2011, the SBV has dealt with nine weak banks. Some names have disappeared from the financial market through mergers and acquisitions, such as HabuBank (merged with SHB), Western Bank (merged with PVFC), Tin Nghia Bank and FicomBank (merged with Saigon Commercial Bank-SCB), and DaiABank (merged withHDBank).

After five years of restructuring, the central bank has still spotted out bad debts and fragile lenders issues to introduce more effective settlement measures. This shows that the process of restructuring the banking system still requires a lot of hard work. – VNS