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Banking & Finance

SBV bank purchases no burden on State budget

Released at: 13:48, 03/11/2015

SBV bank purchases no burden on State budget

SBV Governor responds to concerns from NA delegates over cost of central bank acquiring poorly performing commercial banks.

by Nguyen Vu - Hung Khanh

Though not mentioned prominently in the government’s report to the National Assembly (NA), the State Bank of Vietnam (SBV) purchasing banks for a price of VND0 has attracted much attention from delegates at the ongoing NA session.

Their concerns stem from the SBV purchasing the banks and bearing their debts, which delegates believe may necessitate using State budget funds.

According to a document from SBV Governor Nguyen Van Binh, however, the restructuring of the three banks taken over by the central bank will not require State budget funds.

Governor Binh explained that under the principal direction from the Politburo and the government it was determined that financial institutions would not be subject to the Law on Bankruptcy, in order to secure stable macro-economic, political, and national security.

The SBV was therefore forced to buy weak commercial banks as a last resort, with no other possible solution being available.

The central bank has directed Vietcombank to manage and supervise the Construction Bank and Vietinbank to do likewise with Ocean Bank and GP Bank. Both Vietinbank and Vietcombank have strong financial capacity, are of large scale with stable business performance, and possess the strongest management ability in Vietnam’s banking sector, according to Governor Binh.

He also explained that the SBV buying the banks for VND0 means there is no money spent. In accordance with related laws, existing debts must be repaid before subsequent debts, so the damage to the State Budget is negligible.

Governor Binh said the charter capital of the purchased banks is zero because of their losses. With strong efforts in handling bad debts by related agencies and the SBV the charter capital of the banks will be gradually recovered.

Vietinbank and Vietcombank will not bear any cost and will not provide any capital to the three banks, merely assigning personnel in management and supervision tasks. The capital provided by the SBV to the purchased banks is in the form of credit and the banks are obliged to repay such sums to the SBV.

Governor Binh concluded the report by writing: “Therefore, the solution of purchasing weak commercial banks for VND0 is being conducted by the SBV with strong cooperation from related ministries and follows legal requirements and the directions from the Prime Minister to not use State budget funds and not cause any damage to the State, the SBV, or State-owned commercials banks involved in managing and supervision tasks. The purchasing and handover of weak commercial banks contributes to the security of the deposit system, stabilizing the monetary market and the belief among depositors in the banking system and the plans and solutions for restructuring financial institutions.”

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