VietNamNet Bridge – The central bank’s inspection at nine local lenders has been complete but the restructuring of the local banking system and the handling of weak commercial banks have fallen behind schedule, said the Ministry of Planning and Investment (MPI).

Entrusted by the Government, MPI already sent an additional report on carrying out a comprehensive economic restructuring plan to the fourth National Assembly sitting that wrapped up late last week.

According to the Government, banking restructuring and tackling weak banks are complicated, sensitive and time-consuming as the problems are related to rights, duties and benefits of several sides. Therefore, solving weak banks was slow compared to the end-September schedule.

The central bank had directed relevant authorities to hire an international audit company to audit the targeted banks. The monetary authority at the same time had launched a comprehensive inspection at the banks as well.

The inspection now has been over. The central bank has been able to control the basic situation of ailing lenders as well as their payment capabilities which helps reduce safety risks for the whole system.

Among the nine lenders, Saigon Commercial Bank, Ficombank and Vietnam Tin Nghia Commercial Bank had merged with one another in 2011.

The central banks already approved a plan for TienPhongBank and Hanoi Building Commercial Bank (HBB) to merge into Saigon-Hanoi Commercial Bank (SHB). In the meantime, four others are having their restructuring plans revised before the central bank considers the schemes for approval.

As of the third quarter of 2012, local credit institutions, especially State-owned commercial banks, are awash with current capital, the central bank reports.

However, to tackle bad debts and risk provisions, all lenders have to set aside capital as provisions in line with related laws. As of late August, the provision amount that was yet to be used was some VND72.9 trillion, up over VND14 trillion from the figure reported in end-2011.

In January-August, bad debts that credit institutions covered by risk provisions totaled roughly VND8 trillion. The growth rate of bad debts in June stayed at only 1.2% against January.

The central bank said restructuring credit institutions in general and the banking industry in particular encounters both legal difficulties and opposition from big shareholders of commercial banks.

The prevalent legal frame for State intervention into weak credit institutions when necessary is still insufficient. The industry is short of policies and mechanism on tax and fee reduction and exemption to support lenders in clearing up bad debts and collateral and on merger, consolidation and acquisition transactions to assist banks in restructuring.

VietNamNet/SGT