Illustration. (Photo: Vietnam+)
Governor of the State Bank of Vietnam Nguyen Thi Hong gave explanations to clarify a number of issues raised by the National Assembly deputies about reducing the ownership limit of shareholders to limit manipulation and cross-ownership, early intervention when the bank was withdrawn massively, etc.
Affected banks create "domino" economic consequences
Regarding the adjustment to reduce the limit of ownership of shareholders, shareholders and related persons in granting credit to customers and a customer with related persons, according to Governor Nguyen Thi Hong, the draft Law aims to limit anti-manipulation and cross-ownership in banking activities.
Affirming that the draft law has expanded the scope of related persons compared to the provisions of the Enterprise Law, however, Ms. Hong also added that there is also a provision in the Enterprise Law that depending on the specific characteristics, other laws may stipulate the scope of related persons. With the specific nature of the banking industry related to money, the Drafting Committee has followed the direction of expanding the relevant people.
Has the regulation to reduce the limit on shareholder ownership to limit anti-manipulation and cross-ownership been completely overcome? The Governor of the State Bank said that the provisions in the law must go hand in hand with the organization of implementation, because the practice of shareholder ownership and cross-ownership does not allow it.
“Regulation is only a limited way, in order to solve it, it requires tools and solutions from many relevant agencies such as increasing transparency of the transaction database of the population, the database of equity transactions or the transactions of enterprises. Only with this regulation, if shareholders properly implement it, they can limit the bank's risks.
Referring to reducing the credit limit ratio for customers, whether it reduces the total credit of the economy or makes it difficult for businesses, Ms. Hong said that with Vietnamese banking activities, the investment needs of businesses depend a lot on the banking system and international organizations also warned that if the investment demand continued to depend on the banking system, there would be many potential risks. Whenever the domestic economy has complicated fluctuations affecting businesses and people, it will affect the bank.
“When banks are affected, it will cause a 'domino', the economy should be synchronized with the development of the banking industry, capital markets, securities, corporate bonds must develop and the Government is currently having solutions to aim for that,” Ms. Hong emphasized.
The State Bank plays the role of "lender" of last resort
Regarding early intervention when banks are subject to mass withdrawals, the head of the State Bank emphasized that this is a new point in this draft law. These regulations were drafted by the Drafting Committee on the basis of practical problems encountered in the recent weak banking restructuring process, SCB's mass withdrawal in October 10 and reference to the failure of banks around the world.
Explaining further, she analyzed, with a credit institution that is established and licensed when it meets the operating criteria, due to factors and subjectivity, credit institutions will have difficult times and periods. During the inspection and supervision process, the management agency will warn about risks and let the credit institution make timely correction. If the credit institution has a worse situation, there is a risk of losing its ability to pay the people, the level of management of the management agency will need to be stronger and through the early intervention process.
In the process of early intervention, the Governor of the State Bank stated that the first responsibility lies with the shareholders and bank owners to have a construction plan to overcome difficulties and the management agency will introduce limitations in operation, especially in this period need solutions to support.
Governor of the State Bank of Vietnam Nguyen Thi Hong explained and clarified a number of issues raised by the National Assembly deputies. (Photo: Van Diep/VNA)
Evaluation of the current law has an early intervention, but the one -year term is short and has no support measures, so it is difficult to deploy in practice, so Ms. Hong recognizes the draft law with supportive solutions from the State Bank as the last "lender" when the credit institution is difficult to meet the payment requirements for the people, but also provides for the source of the bank to support the banks of the commune, but also the support from the banks of the Cooperative and the Cooperative Bank.
Mobilizing resources to rescue banks
Given the fact that the current regulations deposit insurance is only used when credit institutions go bankrupt, however, according to Governor Nguyen Thi Hong, international experience, for example from the recent bankruptcy of some US commercial banks, the deposit insurance agency has performed a supporting role.
Compared to the case of SCB with a mass withdrawal, Ms. Hong said that credit institutions themselves can also share and lend, but the law has no specific regulations, so banks do not dare to implement it because it is related to the risks of this loan.
“This draft Law on Credit Institutions is designed in the direction of mobilizing support resources, thereby increasing the responsibility of credit institutions for the safety of the system in general and reducing financial costs for the management agency in handling problems of credit institutions,” said Ms. Hong.
Citing world experience that shows that we do not have to wait until a credit institution has liquidity difficulties to handle it, but we need to intervene early, Governor Hong warned that if a credit institution is put under special control to implement support measures, it will be difficult to ensure the safety of the banking system's operations.
