Analysts said that the Governor of the State Bank would have to explain the central bank decision on buying three commercial banks at zero dong. Doubts about its legitimacy and efficiency were raised in mid-November during the National Assembly session.

The ‘zero-dong bank’ issue has become so burning that some National Assembly’s deputies have asked for permission to set up a provisional committee to supervise the operation of the zero-dong banks.

SBV kicked off the bank restructuring process in 2011 which aims to three goals – improving liquidity, handling weak banks and reorganizing bank governance, including settling bad debts.

The buying of three banks at zero dong was described as the ‘most unexpected’ and ‘most drastic measure’ taken by the central bank. No such move had been taken before in its history.

Le Xuan Nghia, a renowned economist, commented that SBV was really ‘audacious’ when starting the restructuring process some years ago, when the lending interest rate sometimes climbed to 35 percent and the banking system faced liquidity problems. 

Nghia cited the State Bank Law, Credit Institution Law and two Prime Minister’s Decisions to prove that there was legal basis for the State Bank to buy commercial banks at zero dong.

“I personally think SBV has taken a creative and daring step in the specific conditions of Vietnam,” he commented.

“It was necessary to buy the banks at zero dong because they all lost capital and broke the laws. The bosses then every day ate into people’s deposits. If the problem had not been settled, people would have withdrawn money,” Nghia said.

Tran Du Lich, also a renowned banking expert, agreed that the central bank made the correct move when taking over the three banks, commenting that banks are ‘special businesses’ which can be brought into bankruptcy, especially in Vietnam. 

“They do business with people’s money. The State has the responsibility to protect people’s deposits,” Lich said.

Both Lich and Nghia emphasized that the common characteristic of the three cases was that the State Bank settled the banks’ problems with a ‘mechanism’, not ‘cash’.

“The restructuring has been carried out with a certain mechanism, not cash. The State Bank bought the three banks and did not pay debts for the banks,” Lich said.

“If the State Bank had asked for the National Assembly’s permission to allocate budget to settle the banks’ debts, the National Assembly’s deputies would have shaken their heads,” he said.

“In Vietnam, the central bank is the only institution powerful and prestigious enough to buy banks, consolidate them and continue attracting people’s deposits,” Lich said.

VNE