Under Circular 04/2018/NHNN-TT, the SBV Governor stipulates orders and procedures for banking supervision, aimed to minimize the weakness of credit institutions and contribute to restricting risks to the entire banking system.
SBV’s headquarters in Hanoi
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Accordingly, SBV chief of inspector or directors of SBV’s municipal and provincial branches can submit to the SBV Governor to consider and take early intervention on ailing credit institutions.
Within 30 days after receiving the early intervention application announcement, the ailing credit institutions must report to the SBV their status, cause and solutions to resolve the shortages in written documents.
SBV inspection bodies will be also permitted to conduct extraordinary inspection on the credit institutions during the supervision process.
Assessing this decision, Bao Viet Securities Company (BVSC) said that it is necessary to add the early intervention to the banking supervision measures as the costs (both time and money) to overcome the weaknesses of the credit institution will be minimized and at the same time contribute to reducing the risk for the whole banking system.
BVSC analysts also proposed that the legal framework related to the supervision should be studied, updated and supplemented continuously to keep up with the reality of banking operations.
Besides, the new circular also states that banking inspection and supervision agencies will collect, synthesize and analyze information on supervised credit institutions to promptly prevent, detect and handle risks to banking operations.
The agencies will also consider and monitor the observance of regulations on safety of banking operations and other monetary and banking regulations of credit institutions.
The implementation of inspection conclusions, issuing warnings and making recommendations will be also included in the content of supervision.
The agencies will also analyze and assess the financial status, operation, governance and risk degree of credit institutions, besides annually ranking the institutions.
Further, the circular noted that the banking supervision must comply with current laws and ensure accuracy, objectivity, honesty, publicity and timeliness. It also required not obstructing the normal operation of supervised credit institutions.
The new regulation was issued after many cases of violation in the banking industry were uncovered.
According to SBV Governor Le Minh Hung, reports from the Ministry of Public Security showed that 95 economic cases in the banking sector were detected and prosecuted, with nearly 200 banking employees and officials being accused in the 2011-2016 period.
During the first phase of Vietnamese banking system restructuring in the 2011-2015 period, the central bank had to acquire three bank of OceanBank, GPBank and Construction Bank at zero Vietnamese dong and put them under special surveillance.
According to deputy governor Dao Minh Tu, the banks are still operating as normal with their liquidity being improved.
The Construction Bank is coordinating with Vietcombank to soon finish the crafting of a restructuring plan.
The central bank is now entering the second phase of the banking sector restructuring scheme. Based on results of the first phase, restructuring plans are being drawn up for all banks, not just ailing ones.
This year is an important year for the banking system. The effective implementation of Resolution 42 and the revised law on credit institutions will create a consistent mechanism for the quick handling of bad debt, Tu said.
