Vietnam government urges central bank to promptly handle 'weak banks'

The Vietnamese government has ordered the State Bank of Vietnam (SBV) to focus on effectively dealing with "weak banks" to ensure banking system liquidity and safety.

This is one of the requirements in the government’s freshly-issued Resolution No. 31/NQ-CP, which orders ministries, agencies and localities to concentrate on removing difficulties and obstacles in the credit, corporate bond, and real estate markets. The resolution does not specify which are "weak banks".

The central bank was also asked to settle bad debts within the system and minimize new non-performing loans (NPLs), tighten supervision and inspection, and urgently finalize the draft revised Law on Credit Institutions and submit it to the government this month.

The SBV was urged to direct commercial banks to reduce lending interest rates amid the current credit crunch.

It was required to coordinate with other agencies and localities in carrying out monetary policy instruments in a firm, proactive, flexible and effective manner. It must manage monetary policy in harmony with fiscal and other policies, contributing to maintaining macroeconomic stability, controlling inflation, stabilizing money and foreign exchange markets, and promoting growth.

The government told the SBV to manage credit supply effectively to promptly ease the credit crunch. It needs to direct credit institutions to provide capital for production and business activities, priority areas and growth drivers; and to control credit flow into areas with potential risks.

The central bank was demanded to help minimize a credit crunch facing real estate and other areas while managing exchange rates properly.

Prime Minister Pham Minh Chinh in early January approved a plan to restructure "weak banks" in association with settlement of bad debts for the 2021-2025 period.

The government also asked the Politburo, the Party's premier decision-making body, to issue mechanisms to deal with the banks, including Saigon Commercial Bank (SCB), and restructure wholly state-owned Vietnam Development Bank (VDB), then Deputy Prime Minister Pham Binh Minh said at a conference on January 3.

The other banks named were DongABank, Construction Bank, Oceanbank, and GPBank.