VietNamNet Bridge – Observes have commented that the unsettled big problems
would put a heavy burden on the Governor of the State Bank--Nguyen Van Binh on
the next year of his term.
Governor of the State Bank Nguyen Van Binh |
Binh is believed to deserve credit for keeping the dong/dollar exchange rate
stabilized over the last two years. He has also successfully eased the interest
rates in order to ease the capital financial burden on businesses. Especially,
he has successfully protected the weak banks which were facing big difficulties
due to the weak liquidity, while forcing banks to experience the banking system
restructuring process.
However, he still cannot settle many big problems.
The problems in the year of dragon…
It is nearly impossible to have a reliable database about the operation of the
banking system, even though in 2012, the State Bank made public some figures
about the credit activities and foreign currency reserves.
Everyone knows that bad debt remains the biggest problem for the Vietnam’s
banking system. However, it is still unclear how big the bad debt is. While the
State Bank of Vietnam said the bad debt ratio was 8.6 percent, some experts said
it could be 13 percent, and some others said 15 percent.
Regarding the measures to settle the bad debts, Governor Binh stated a national
asset management company would be set up which would buy back banks’ debts with
the money to be raised from bond issuance.
Meanwhile, the government has recently stated that the bad debt settlement would
depend on commercial banks, because the state budget does not have money to deal
with the debts.
The bank restructuring process has been going very slowly, which has made
international observers feel impatient. At the Vietnam Business Forum in 2012,
Sanjay Kaira, Chief Representative of IMF in Vietnam warned that any further
delay in the bank restructuring would lead to the increases in the provisional
debts of the government.
Meanwhile, Fitch Ratings, in its latest report about the Vietnam’s banking
outlook, “threw a ladle of cold water” into the achievements gained by Vietnam
when saying that the progress in the banking system reform and the establishment
of an asset management company remain “unclear.”
…would still cause headaches in 2013
According to Le Trong Nhi, there are two main groups of problems Binh would have
to face in 2013, including the 1) banking system restructuring and bad debt
settlement, and 2) the relations among inflation, credit growth and gold market
management.
The former group comprises of the problems relating to the economic stagnation,
while the latter comprises of the problems relating to the economic growth.
These are the two tasks which Vietnam will find it difficult to obtain both, and
it may have to sacrifice one for another.
Vietnam has been seeing high inflation rates since 2007. Though the inflation
rate was lowered to the one digit level in 2012, it may go beyond of the control
any time because of some existing problems.
One of the problems is that the interest rates have been slashed too sharply and
rapidly, according to IMF. This may trigger a new wave of high inflation in
2013, even though the purchasing power still cannot recover in the year.
The State Bank, while slashing the interest rates six times in 2012 alone,
decided to set up a cap on the lending interest rates applied to some business
fields only, not all of them. This has raised the doubts that the State Bank did
this to protect the groups’ interests.
DDDN