VietNamNet Bridge - The bank restructuring process has been going on for four years, but the proposals on tax incentives for banks are still pending.

The government’s newly released report shows that the support of credit institutions will be connected with the state budget.

The State Bank of Vietnam (SBV) has suggested giving some preferences to four groups of banks which will undergo restructuring.

The first group comprises banks which will need policies on financial support, including corporate income tax reduction and finance leasing asset assignment tax exemption. The banks may be allowed to pay compulsory reserves in government or local authorities bonds and to borrow money at especially preferential interest rates.

The second group comprises banks which need technical support. They will need specific technical support package and training courses to improve capability for key personnel.

The third one comprises banks which SBV may consider easing some requirements when licensing to open more branches and expand networks. They may also be able to extend the process of restructuring the ownership ratios and provide loans beyond the credit limits and enjoy some specific mechanisms.

The fourth one will enjoy the other specific mechanisms as they request.

The central bank has proposed to the government to assign the Ministry of Finance to considering cutting the corporate income tax for three years for credit institutions which experience merger and acquisition (M&A).

The proposals are ‘being considered by the Prime Minister’ as shown in the report, though the bank restructuring process has been going for the last four years.

SBV said Vietnam still does not have a legal framework which encourages M&A of credit institutions, which is the reason why it cannot accelerate the process of restructuring banks and treat weak institutions.

The report drew the public’s attention as it said that restricting banks and setting bad debts without the state’s money has ‘affected the progress and sustainability of the process’.

An analyst commented that the bank restructuring was believed to be implemented well without the state’s money, but that view may have to change.

If the government approves the central bank’s proposal on tax remission, the state’s money will be indirectly used for restructuring.

Sources said that the proposal on tax remissions has not been applauded by the Ministry of Finance, which thinks the current laws do not allow such tax incentives for institutions in their M&A deals.

However, the sources said it is unclear if the ministry has to compromise in the future as banks all have complained that too many big problems have arisen after the mergers.

TBKTVN