Creditors may be allowed to go bankrupt

11:21 | 25/01/2016 Economy

The State Bank of Viet Nam (SBV) would consider allowing some ailing financial companies and people's credit funds to declare bankruptcy this year, according to Deputy Governor Nguyen Phuoc Thanh.

Creditors may be allowed to go bankrupt

A transaction office in Ha Noi. The SBV plans inform the market about the bankruptcy in the banking system this year. — Photo

The plan is to gradually inform the market about the bankruptcy in the banking system and warn bank owners to be much more serious in doing business, Thanh said.

Though there had been some distressed credit institutions in the domestic banking system, the country had not seen any bankruptcy issues for the past years as the central bank was concerned that it could have a negative effect on the entire banking system.

Under a restructuring scheme for the banking system from 2011 to 2015, the number of commercial banks cut from 42 to 34. Besides restructuring 10 banks through mergers, the central bank dealt with three ailing banks – Ocean Bank, Viet Nam Construction Bank (VNCB) and Global Petroleum Bank (GPBank) – by acquiring them at zero dong.

With the acquisition, the SBV currently holds stakes in eight banks, instead of five it held before 2011. Total charter capital owned by the SBV in the eight commercial banks by the end of last year increased 1.7 times to more than VND113 trillion (US$5.15 billion). The figure is equal to roughly 37 per cent of total charter capital of 34 commercial banks in Viet Nam.

Thanh said that transparency in the banking system has improved significantly in the past four years. Cross ownership at banks has been put under control and liquidity of the banking system has been secured.

However, Thanh required banks to take more drastic measures this year to enhance their financial and governance status to meet the rising demands.

He said that the central bank this year would also continue to ramp up the merger and acquisition of ailing credit institutions with priority given to those which are done voluntarily. If the institutions did not approach voluntarily, the central bank would intervene./.

Source: VNS