Credit institutions to be restructured in 2016-20 period

Hung said the restructuring would take place under a project on restructuring credit institutions in association with the settlement of non-performing loans (NPLs) in the 2016-20 period, which the SBV is finalising under the direction of the Government to report to the Politburo for approval.

The SBV will formulate detailed plans and focus all its resources on implementing the project thoroughly this year, following approval by the Politburo and the Government, according to Hung.

All credit institutions will have to map out their own restructuring plans and submit it to relevant management agencies for approval before implementing the plans.

As for the three credit institutions known as “zero-dong” banks that were acquired compulsorily by the Government, the central bank should build its own restructuring plans and submit it to the Politburo for approval and implementation.

Under the project, the central bank will divide solutions to restructure credit institutions into three groups based on the types of credit institutions -- the group of State-owned banks with more than 50 percent of State ownership; the group of joint stock banks, finance companies and financial leasing companies; and the group of foreign credit institutions, cooperative banks, the People’s credit funds and microfinance institutions.

Hung said restructuring measures for credit institutions are applicable to both healthy and weak units.

He said one of the core principles of SBV while restructuring the system was to protect the interests of depositors. The central bank confirmed this would take place during the initial phase of the restructuring and would also be the principle throughout the coming years.

Accordingly, the methods and measures to restructure credit institutions will be applied in accordance with the specific characteristics of each institution and in line with the market mechanism based on the principle of being cautious, ensuring the rights of depositors and maintaining the stability and system security under the Government’s policies on restructuring the financial market, with focus on credit institutions which was stipulated under Resolution 05-NQ/TW, dated November 1, 2016.

According to the central bank, the disposal of bad debts in 2017 must be linked to the implementation of measures to prevent and minimise newly arising bad debts and credit quality improvement of credit organisations, and promotion of the role of Vietnam Asset Management Company in bad debt settlement to ensure the NPL ratio is maintained at a safe and sustainable level of less than 3 percent of the total outstanding loans.