The State Bank of Vietnam (SBV) expects to submit to Prime Minister Nguyen Xuan Phuc a project to restructure credit institutions between 2016 and 2020 in Q3 of 2016.

Deputy Chief Inspector of the SBV’s Inspection and Supervision Agency Nguyen Van Hung told Securities Investment newspaper that the project would closely resolve non-performing loans (NPLs) in a move to sustain the NPL ratio under 3 percent.

Hung said that preventive measures would be taken to minimise new NPLs and enhance the credit quality of credit institutions.

Under the project, the central bank will also continuously take drastic measures to thoroughly restructure and resolve ailing credit institutions.

Supervisory measures and support policies on commercial banks, which the central bank acquired, would also be mentioned in the project, according to Hung.

The new restructuring project is aimed to continuously enhance the country’s banking system, which has been improved significantly thanks to a strong restructuring scheme from 2011 to 2015.

In 2011, the banking system was unsafe with many credit institutions suffering poor liquidity, weak governance and accelerating NPLs. The foreign exchange market was also very volatile while the government’s foreign exchange reserves remained low.

To remove these shortcomings, the banking system had undergone strong restructuring between 2011 and 2015, which helped it register major achievements.

Under the scheme, the number of commercial banks was cut from 42 to 34. Besides restructuring 10 banks through mergers, the central bank dealt with three ailing banks – Ocean Bank, Vietnam Construction Bank (VNCB) and Global Petroleum Bank (GPBank) – by acquiring them at zero dong.

The five year restructuring scheme has contributed significantly in controlling inflation, stabilising the macro-economy, supporting economic growth and ensuring the safety of the banking system.

VNA