Vietnam bank reform slow but encouraging
HANOI -
Vietnam has taken only minor action
on restructuring its banking system
but authorities might accelerate the
process by closing a number of small
semi-private banks this year, the
World Bank said on Thursday.
Andrew Steer, director of the World
Bank in Vietnam, said he was
encouraged by the quiet enthusiasm
for banking reform in the
communist-ruled country.
He said Hanoi was reviewing
operations at the nation's four big
state commercial banks, which
account for the bulk of lending, and
planned to set up a company to buy
bad loans.
The review of the big commercial
banks might be finished by
September and include guidelines to
halt politically motivated lending to
state-run firms, he said in an
interview.
Economists say the success of
banking reform hinges on efforts to
restructure some 5,500 inefficient
state-owned firms, which gobble up
more than half the available bank
credit but only employ five to 10
percent of the workforce.
Steer said an assessment had been
completed of the debt and
management situation of the country's
50 mainly small semi-private
institutions known as joint-stock
banks, which sprang up following
adoption of economic reforms in the
late 1980s.
Two joint-stock banks were closed
last year and another five of the less
viable institutions could be shut in
1999, he said.
``In terms of actual restructuring very
little has been done but the
government is devising a clear
roadmap,'' Steer said.
He said central bank officials were
working on plans for what Hanoi
would call an asset management
company to buy bad bank loans.
Technical issues such as identifying
bad loans and stripping them from
banks had to be worked out first, he
said.
Exactly how much bad debt sits on
bank books in Vietnam is hard to
tell. Last November the government
said overdue loans in the banking
system, including foreign banks,
amounted to 13.7 percent of total
outstanding credit.
Economists estimate total loans
among local banks at around $5
billion, or 20 percent of gross
domestic product.
Steer said the government, which has
little spare change amid a slowing
economy and hard currency crunch,
had injected small amounts of
recapitalisation funds into the four big
state commercial banks.
The four are: Bank for Foreign Trade
of Vietnam, Industrial and
Commercial Bank of Vietnam, Bank
for Investment and Development of
Vietnam and the Vietnam Bank for
Agriculture and Rural Development.
Hanoi had asked for funding to
support recapitalisation, a request the
World Bank would consider once
substantial operational restructuring
had been implemented in the four
institutions.
This included a clear action plan and
more transparency in the way in
which they assessed risk.
``The time will come if they continue
with their present progress when
funding support for recapitalisation
will be appropriate,'' Steer said.
Reuters - April 1st, 1999.
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