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Restructuring of Vietnam’s banking system: Problems and recommendations

The paper analyzes the current situation of the Vietnam’s banking system and figured out four primary difficulties facing it namely high ratio of bad debts, low owner’s equity, unsustainable liquidity and unfair competition. | 44 | Võ Thị Thúy Anh Restructuring of Vietnam’s Banking System Restructuring of Vietnam’s Banking System: Problems and Recommendations VÕ THỊ THÚY ANH Doctor of Philosophy, Đà Nẵng University of Economics Email: vothuyanh@yahoo.com ABSTRACT The paper analyzes the current situation of the Vietnam’s banking system and figured out four primary difficulties facing it namely high ratio of bad debts, low owner’s equity, unsustainable liquidity, and unfair competition. This fact poses serious problems for Vietnam’s government and the SBV in their effort to restructure the national banking system. The author recommends four groups of solutions to these problems, that is, (i) classifying and restructuring banks, (ii) enhancing the bank’s immunity by means of bank’s owner’s equity, (iii) disposing of bad debts and preventing newly-arising ones; and (iv) creating a healthy environment for banking sector and orienting banking activities towards international standards Keywords: restructuring, banks, solution JED No.212 April 2012 | 45 1. RATIONALE In order to resolve difficulties and inadequacies facing Vietnam’s economy, the Vietnamese government has introduced a comprehensive project on economic restructuring and alternation of growth model with a view to enhancing the performance and competitiveness of the national economy. This project was presented to the Vietnam’s National Assembly on April 17, 2012. Its kernel is the restructuring of banking organizations. Moreover, the Vietnamese Prime Minister issued Decision 254/QĐ-TTg dated March 1, 2012 concerning the restructuring of Vietnam’s banking organizations in the period 2011-2015. This expresses the sheer determination of Vietnam’s government in restructuring the national banking system. This paper analyzes the current situation of Vietnam’s banking system and sheds light on the necessity for a restructuring as well as problems facing the government and the whole banking system while implementing the restructuring.