Weak bank identities kept confidential

HANOI – Tens of local credit institutions are classified as weak and disallowed for credit growth this year, said Deputy Governor Nguyen Dong Tien of the central bank, though declining to reveal the specific names of such banks.

The newly-issued Directive 01 has categorized local banks into four groups namely healthy, average, below average and weak, with the respective credit growths assigned for each group in 2012 being 17%, 15%, 8% and 0%.

“The credit institutions listed in group four are struggling with severe lack of liquidity, on the verge of disruption and under restructuring process,” said Tien at a press briefing in Hanoi on Tuesday to further explain the directive. Those banks with signs of insecurity cannot have credit growth, he added.

He recommended those banks classified as weak to maintain their operations, collect old debts and restructure their asset portfolios.

However, Tien said the central State Bank of Vietnam would keep secret the identities of the banks belonging to this group, as well as the other groups.

“We will not publicize but send specific notices to each credit institution,” he explained.

He said the central bank’s governor has constantly been working with local lenders, and the banks have understood the policy and did not complain.

There was reason to apply the same credit growth to all banks in 2011, Tien stated, but this year the central bank will make diagnosis and prescription in accordance with the health status of each credit institution.

The deputy governor informed the criteria to categorize the credit institutions include capital scale, management capability, credit risks, asset quality, and compliance with the central bank’s policy. After six months of deployment, the central bank will reassess the compliance with Directive 01.

Speaking to the Daily, a financial expert from the Ministry of Finance deemed Directive 01 appropriate and acceptable given the current difficult situation of the banking system, despite its nature being an administrative intervention by the central bank. Still, he said the central bank should take into account the domino effect of the weak banks’ liquidity risks on the entire system.

“Banks disallowed for credit growth may have many psychological and financial risks,” he stressed.

Moreover, it will be difficult to conceal the identities of the weak banks since the banks must publicize their credit growth targets at their shareholder meetings.

The State Bank of Vietnam has recently unveiled its intention to merge 5-8 commercial banks in 2012, following the merger of the first three banks late last year. Meanwhile, the National Financial Supervisory Commission has warned that liquidity would be the biggest concern for the economy this year.