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Restructuring commercial banking system in Viet Nam at this period
20/1/2012 14:4' Send Print

There are four major emerging problems in the banking system of Viet Nam which include low quality of products, lack of self-generated capital, low payment capacity, ineffective business administration and risk management and business losses.

The number of commercial banks is not the cause of the commercial banking system restructure. The objective of commercial banking system restructuring is clear, that is to improve service quality. There are objective and subjective causes that lead to these obstacles which include loose management of real estate, ineffective management of state economic groups and local infrastructure projects, high inflation, and high interest rate.  In addition, commercial banks’ control of credit quota has resulted in lack of loan for business investment.

Following solutions should be taken to rectify these constraints.

- Commercial banks strengthen administration and operation, review and complete internal stipulations, develop clear and suitable operation and business strategies, refrain from large investment in high-risk areas like security and real estate, enhance internal auditing, ensure independence and improve efficiency of internal control and supervision.

- State regulatory offices promulgate policies on management of commercial banks to control risks and challenges before they occur and strengthen monitoring and supervision.

- Bad debts relating to state economic groups in commercial banks should be liquidated.

- Experiences and lessons should be drawn from the first restructure of commercial banks which had several similar causes, namely” financial and monetary crisis, heated development of estate market and particularly management and operation capacity.

Prof. Dr. Nguyen Dac HungState bank of Viet Nam