After drastic restructuring in the Vietnamese banking system, mergers and acquisitions (M&A) still need to be made by an additional 34 commercial banks, said Sandeep Mahajan, World Bank (WB)’s Lead Economist for East Asia-Pacific, at a press conference to announce the regional Economic Update on April 11.

Scene at the World Bank's press conference

He affirmed that the M&A should be done in a strict and suitable process to create a sharp fall in number of credit institutions.

Although substantial progress has been made in the shake-up of financial organisations, it is hard to slash the number of commercial banks from 34 to 15-17 by the end of 2017, according to the WB’s evaluation.

The bad debt ratio in the banking system has fallen to 3 percent of total outstanding loans, which was stemmed through credit growth and shifting bad debt to the Vietnam Asset Management Company (VAMC). The commercial banks were asked to set up provisional funds for the debts moved to the company, whereas related risks which create loss to the capital have not been completely removed.

Sandeep Mahajan said that Vietnam needs to lighten the burden on the private sector while mapping out solutions for medium-term fiscal consolidation.

VNA