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Vietnam Bank Restructuring Requires Huge Resources, Says World Bank Official

GBS - Total assets of the local banking system doubled the country’s gross domestic product (GDP), thereby restructuring the sector would cost Vietnam huge resources.

Total assets of the local banking system doubled the country’s gross domestic product (GDP), thereby restructuring the sector would cost Vietnam huge resources, said Sameer Goyal, Country Sector Coordinator - Finance and Private Sector at The World Bank.

Vietnam’s legal, institutional and monitoring framework is behind international standards/practices (such as creditors’ rights, solvency, and bankruptcy), Goyal said while assessing difficulties in restructuring the local financial sector.

In addition, professional qualifications, especially in dealing with bad debts of management agencies and banks are still poor.

Credit-to-GDP, an indicator for risk of financial crisis according to Sameer Goyal, has increased fast in Vietnam, compared to some other countries. Local commercial banks reported bad debts at 5% of total loans; yet the central bank came out with a much higher rate of 8.6% (VAS-October 2012). The number may even climb higher under IAS/IFRS standards.

Vietnam currently has 35 commercial joint stock banks and 5 state-run lenders. Assets of these state-run banks represent a half of the total.

Source StoxPlus

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