Thạc Sĩ Các rủi ro của hệ thống ngân hàng Việt Nam và một số gợi ý chính sách

LUẬN VĂN THẠC SĨ - MASTER IN PUBLIC POLICY THESIS
NĂM 2012

RISKS TO VIETNAM’S BANKING SECTOR AND POLICY RECOMMENDATIONS
TABLE OF CONTENTS
Page
CERTIFICATION . iii
ACKNOWLEDGEMENTS . iv
ABSTRACT . v
ABBREVIATIONS . vi
TABLE OF CONTENTS . ix
LIST OF FIGURES . xi
CHAPTER 1. INTRODUCTION 1
1.1. Introduction 1
1.2. Research Questions 3
1.3. Research Objectives . 3
1.4. Research Methods, Sources of Information and Research Scope . 3
1.5. Thesis Structure . 4
CHAPTER 2. LITERATURE REVIEW . 5
2.1. General Literature 5
2.2. Implications for Vietnam . 7
CHAPTER 3. RISKS TO BANKING SECTOR OF VIETNAM . 8
3.1. Macroeconomic Vulnerabilities . 8
3.2. Microeconomic Risks 9
3.2.1. Risk from NPLs . 9
3.2.2. Liquidity Risk 19
3.2.3. Currency Risk 25
3.2.4. Risk from Connected Lending 28
CHAPTER 4. POLICY RECOMMENDATIONS 34
4.1. Resolution for NPLs 34
4.2. Resolution for Liquidity Risk 37
4.3. Resolution for Currency Risk 39
4.4. Resolution for Connected Lending 40
CHAPTER 5. CONCLUSION . 43
REFERENCES . 44
APPENDIX I. COMPARISON BETWEEN VIETNAMESE REGULATIONS AND INTERNATIONAL STANDARDS ON NON-PERFORMING LOANS . 57
APPENDIX II. LITERATURE ON RESOLUTIONS OF NONPERFORMING LOANS 61
APPENDIX III. LITERATURE ON RESOLUTIONS OF LIQUIDITY RISK 65
APPENDIX IV. LITERATURE ON RESOLUTIONS OF CURRENCY RISK . 70
APPENDIX V. LITERATURE ON RESOLUTIONS OF CONNECTED LENDING 76
APPENDIX VI. FIGURES 81
APPENDIX VII. CONNECTED RELATIONSHIP AND LENDING . 93

1.1. Introduction
Recently the Vietnamese economy has experienced some difficulties. The banking system has also faced some extraordinary events, such as systematic and serious violations of the deposit rate cap, rapid credit growth and major incidents of fraud. All of these events have had negative impacts on the prestige of the banking system and perceptions of the management capacity of the State Bank of Vietnam (SBV). Some of the reasons for these include weaknesses and shortcomings in financial capacity, management and competition among banks in the market. Therefore, the public‟s confidence in the banking system has declined sharply.
A growth model that is excessively dependent on the continuous supply of capital has put pressure on credit provision to the economy. Average credit growth for the period 2001-2011 is not only higher than the mobilization rate but also far higher than the GDP growth rate (approximately four times). Banks via their intermediary role pumped large amounts of money into the market. When cheap loans were easily accessible, conditions were created for inefficient investments. The trend of loosening credit standards has encouraged an increase in leverage of local enterprises, especially state owned enterprises (SOEs). The inefficiency and wastefulness in using available capital resources have accumulated non-performing loans (NPLs) over time and impaired asset quality. The consequence is that the Vietnamese economy experienced high credit growth with a rising stock of domestic credit relative to GDP. In 2011, this rate was at nearly 125 percent. Such a high rate compared to economic capacity and other neighboring countries has led to the increase in NPLs and inflation rate.
During the period 2001 to 2011, credit growth of Vietnamese banks averaged 30.41 percent per annum. High profits in that period induced many new investors to join in the establishment of new banks or upgrade rural to urban banks. The banking system experienced a boom of new banks and a strong growth in total assets just in a short time. Many of these banks lacked the necessary financial and technological capacity required for such a risk-taking industry as well as professional experience and ethical standards expected of sound bankers. In addition, the shortfall of skilled employees reduced workforce quality and in that way indirectly lowered the banks‟ risk assessment ability and exposed them to future credit risks. The more violent competition and struggle for market share as well as profits forced bank managers to loosen credit-granting criteria. In such conditions, prudential requirements of capital adequacy, liquidity and asset quality were ignored not only by banks but also by SBV. The lack of appropriate regulation of credit risk provision has made the banking system become vulnerable at a time of monetary contraction.
When the global financial crisis, reduction of economic growth, capital outflows, the public debt crisis in the EU, contraction of export markets and a drop in the price of real estate projects emerge, many enterprises could not continue doing business. The latent problems in the banking system were exposed. Liquidity problems and bad debt are becoming more and more serious with frenzied efforts by problem banks, which are illiquid or even insolvent, to mobilize deposits and maintain normal banking business. This is also the first time that collateral requirements have been attached to interbank lending. It is a signal of serious deterioration of confidence among banks in this normally safe market. In addition, risks from currency mismatch and connected lending seem to be larger and are not being well-controlled. These facts put SBV in a challenging position and required a prompt response to prevent the system from collapsing. The official declarations regarding bank restructuring sent by the Prime Minister and Governor of SBV indicated that bank restructuring is an important part of economic restructuring to avoid the danger of a banking crisis. Therefore, the identification of important risks faced by the banking system becomes an important and urgent task for policy recommendations.
The third meeting of 11th Communist Party of Vietnam Central Committee highlighted the restructuring of financial markets with a focus on the banking system as one of the three most important objectives of the next five-year period. The restructuring plan to improve safety and soundness of the banking system is to be carried out in the spirit of guaranteeing the interests of depositors and doing the utmost to handle any bank collapses. Therefore, the need to specify major risks threatening the stability of the banking sector becomes very important.
1.2. Research Questions
This thesis intends to answer the following questions:
(i) What important risks (microeconomic risks) is the Vietnamese banking system facing?
(ii) What should be done to reduce such risks?
1.3. Research Objectives
The thesis has the following research objectives:
(i) To specify the main risks (microeconomic risks) faced by the Vietnamese banking system through analyzing the banks‟ financial data.
(ii) To research and propose policy recommendations in order to reduce adverse effects of such risks.
1.4. Research Methods, Sources of Information and Research Scope
This research uses qualitative method by secondary data collected from financial statements, annual reports of commercial banks, SBV annual reports, and related reports of other organizations. Through this analysis, the research intends to specify the main risks faced by the banking system and propose recommendations to effectively control and manage such risks.
Because joint-venture banks and foreign-owned banks account for only a small share of the market and most of these banks do not make their financial statements public, it is hard to analyze such banks‟ financial situation. Therefore, for the purpose of this thesis, the research will be limited to the data analyzed within scope of commercial banks including state banks and other domestic commercial banks.