Acknowledging its limitations and inadequacies, the State Bank of Vietnam (SBV) said it will thoroughly implement all of the Prime Minister’s instructions by adopting solutions to enhance the quality and the efficiency of its operations while improving its inspections of the banking sector.

SBV Headquarter Office in Hanoi. Photo: SBV.

Its determination comes after the central bank was found guilty of violating regulations regarding inspections, complaint settlements, and anti-corruption efforts, according to a recent report from the Government Inspectorate.

The inspectorate found the bank’s remote monitoring had failed to detect potential risks to credit institutions or fulfill its role as an early warning system. “The credit system faces many potential risks but the SBV has failed to come up with a solution to deal with them, resulting in plans having to be adjusted passively every year,” the report stated.

It also uncovered violations made by the bank’s inspection and supervision agencies in Hanoi and Ho Chi Minh City between 2010 and 2015. In some cases, the agencies were overzealous, while in others they were negligent and did not punish violators.

The SBV was also assessed as having failed to deal with credit institutions in danger of insolvency. While many institutions did not follow regulations, the central bank fell short in detecting, preventing, or dealing with such violations. Regarding anti-corruption efforts, the SBV’s guidelines on the declaration and disclosure of assets did not follow government regulations, resulting in delayed and inaccurate annual reports.

The inspectorate has asked the Prime Minister to instruct the SBV on reviewing and revising its regulations and guidelines for inspections and anti-corruption efforts. The SBV Governor has also been instructed to take disciplinary action against groups and individuals listed in the Government Inspectorate’s report.

Additionally, the SBV’s provincial and municipal units have been instructed to closely monitor the implementation of the Government Inspectorate’s recommendations, and to report all suspected criminal activities.

The central bank has committed to enhancing its inspections of the finance market and banking activities, while at the same time keeping a close eye on the operational quality of credit institutions and foreign bank branches in the country.

According to the SBV, the completion of a comprehensive legal framework on the inspection and supervision of the banking sector has been gradually implemented. The scheme to settle non-performing loans (NPL) and restructure credit institutions in the 2016-2020 period, which was approved in July, requires all credit institutions map out their own restructuring plans and submit them to relevant management agencies for approval.

In their restructuring plans, institutions must look at and assess their own finances, corporate governance, shareholders, and capital ownership status. They must also detail objectives, orientations, and solutions for their restructuring and for bad debt settlement for each year.

The SBV has instructed all credit institutions to set up steering committees focused on these issues so they can spot and report obstacles in the implementation process to the central bank without any delay.

“All of the solutions within the scheme to settle NPLs and restructure credit institutions in the 2016-2020 period have been implemented, ensuring the healthy development and international integration of the banking sector,” the SBV noted.

VN Economic Times