The State Bank of Viet Nam (SBV) will reduce the reserve requirement ratio for banks that take part in the restructuring of the banking system.

Under Circular 23/2015/TT-NHNN, which will take effect on January 28 next year, the SBV governor will consider reducing the ratio even to zero per cent for ailing banks that are under the central bank's special supervision.

As for banks, which are under restructuring or are selected by the central bank to take part in the restructuring of other ailing banks, the governor will decide on decreasing the ratios depending on each case.

Currently, the compulsory reserve ratio applicable to demand and below 12-month term deposits is three per cent of the total deposits, while the rate for 12-month-plus term deposits is one per cent. The ratios for foreign currency deposits are eight and six per cent, respectively.

The above rates have remained unchanged since 2012.

Under the circular, the central bank also said it would impose fines on banks that fail to meet the reserve requirement ratio.

Industry insiders said the move was aimed at encouraging banks to take part in the restructuring as the reduction of the reserve requirement ratio would help them have cheaper capital sources.

According to the central bank, after four years of major restructuring of the banking system, eight names have disappeared from the market, which are MDBank, MHB, DaiABank, and Ficombank, as well as TinNghiaBank, SouthernBank, WesternBank and Habubank.

Economist Tran Hoang Ngan said the current number of banks was ‘reasonable'. However, he said it was not important how many banks were operational, but how to manage the banks in the most effective way.

After the restructuring, all weak banks had recovered well in accordance with plans set up by the central bank, Ngan said.

Deputy Chairman of the National Financial Supervisory Committee Truong Van Phuoc said despite the huge difficulties in the debt settlement process, the banking system still could make profits.

Except three banks that made losses, the system still could make a post-tax profit of VND34 trillion (US$1.517 billion) in 2014, an increase of 5.3 per cent when compared with 2013, and 13.8 per cent when compared with 2012.

VNS