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Banking & Finance

Switzerland provides support to strengthen banking sector

Released at: 18:34, 01/10/2019

Switzerland provides support to strengthen banking sector

Photo: Viet Tuan

World Bank and State Bank of Vietnam sign financing agreement for $2.2 million grant from Swiss Government to strengthen soundness and resilience of local banking sector.

by Doanh Doanh

The World Bank and the State Bank of Vietnam (SBV) have signed a financing agreement for a grant worth $2.2 million provided by the Swiss Government.

The project aims to strengthen the soundness and resilience of the banking sector by enhancing the capacity of the SBV to address structural weaknesses in the banking system. “A healthy banking sector, which is the largest segment of Vietnam’s financial system, is fundamental to the country’s sustainable economic growth,” said Mr. Ousmane Dione, World Bank Country Director for Vietnam. “By bringing in world-class expertise in banking sector development, we hope we can support the SBV in successfully implementing the structural reforms they are committed to delivering.”

The World Bank will provide technical assistance to implement reforms laid out under the Banking Restructuring Plan 2016-2020 and the subsequent 2025 Banking Sector Strategy.

This grant is part of the broader $8 million Strengthening Banking Sector Soundness and Development Program provided by Swiss State Secretariat of Economic Affairs (SECO) and administrated by the World Bank.

Challenges in the banking sector include issues of asset quality, weak capitalization, and regulatory constraints that inhibit further investment in the sector. In addition, Vietnamese banks have higher overheads and provision more for non-performing loans. The sector is being revamped towards more market-oriented operations, underpinned by international standards, and stronger financial stability monitoring.

The World Bank will work with the SBV to strengthen the legal and regulatory framework for the banking sector, especially the Law on Credit Institutions and the implementation of National Assembly Resolution No. 42/2017/QH14 on settling bad debts. The project will also help the SBV better anticipate and withstand shocks, improve supervisory capacity in line with international standards and good practices, support the development of a debt market, and build the capacity of the Vietnam Asset Management Company to properly manage underperforming assets.

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