On the basis of reviewing the restructuring of the financial system from some of the most critical aspects, the monograph written by Assoc.Prof.Dr. Editor-in-Chief Le Trung Thanh has clearly identified the problems of restructuring the financial system after the crisis, on that basis, proposed policy recommendations to continue implementing the restructuring of the financial system more effectively and suitable to the new context of the domestic and world economy.
Author: Assoc.Prof.Dr. Le Trung Thanh
(Editor)
Cover Type: Paperback
Book size: 16 x 24 cm
Cover price: 119,000 VND
Place of publication: Science and
Engineering Publishing House
Publication year: 2017
ISBN: 978-604-62-8997-5
After the global financial - monetary
crisis in 2008, the domestic macro-economy fell into recession and there were
many signs of prolonged instability, the Vietnamese economy revealed many
systemic weaknesses, which most obviously are low labor productivity and
competitiveness. Faced with that situation, the Government of Vietnam has
carried out economic restructuring associated with transforming the growth
model towards improving quality, efficiency and competitiveness. Three focus
areas of economic restructuring have been identified by the Government,
including:
(i) Investment restructuring, focusing on
public investment;
(ii) Restructuring state-owned
enterprises, focusing on corporations and corporations;
(iii) Restructuring the financial system,
focusing on credit institutions.
Of the three above-mentioned focuses, the
restructuring of the financial system was identified as very difficult, because
of the existing problems and limitations of both the commercial banking sector
and the state budget sector which prolonged. The handling of restructuring in
both these areas is extremely sensitive, affecting all three basic tasks of
economic restructuring, including: (i) Stabilizing the economy; (ii) Reform the
State - market relationship to facilitate business; and (iii) Modernizing the
economic structure.
Overcoming these difficulties, the results
of restructuring the financial system in the early stages are very encouraging.
Weak and at-risk joint-stock credit institutions have been closely monitored
and rearranged, implemented to handle bad debts, healthy balance sheets, and
ensure system safety. The financial market is stable, safe, and liquidity is
guaranteed. By the end of December 2015, the system of credit institutions
reached a capital adequacy ratio of 13% (the prescribed minimum level is 9%)
and fully met the ratios of solvency and short-term capital for providing
medium and long-term loans in accordance with the law. The size of the
financial market, including the stock market, maintained its growth momentum.
Discipline and discipline in the money market and in the banking sector are
strengthened, improving the healthy and safe level of the business environment.
The system of credit institutions has both restructured and ensured continued
growth to support the economy. The average lending interest rate decreased from
17.9% in 2011 to 9.08% in 2015, thanks to which credit growth gradually
improved. In the context of a sharp decrease in deposit interest rates, an
increase in total capital mobilization from the economy of the system of credit
institutions shows that the public's confidence in the banking system has
improved.
However, restructuring the financial
system has many limitations such as the slow change in the structure of the
financial market, the mobilization and allocation of medium and long-term
investment capital still relies heavily on the financial system. commercial
banks, while the participation of non-banking institutions is relatively
limited. Although the size of the stock market has grown rapidly, it has not
yet become the most important medium and long-term funding channel for the
corporate sector. Capital market institutions are not fully developed,
especially there are no credit rating agencies. In addition, many systemic and
long-term weaknesses of credit institutions have not been fundamentally resolved,
especially the problem of bad debt, cross-ownership and risky banking
management; Some commercial banks have not been completely handled, which is
very weak and shows signs of bankruptcy. Therefore, the risk of the whole
system and the risk of each credit institution is still very large.
Regarding the limitations of budget
expenditure restructuring, it can be seen that the state's spending scale is
still large, not effectively controlled, continuously increasing rapidly and in
danger of exceeding the current capacity of the State. economy, limiting the
development investment potential of the country. State budget balance continues
to be difficult, the budget deficit persists, public debt is still increasing
rapidly and nearly reaching the ceiling of 65% of GDP, the Government debt has
exceeded the ceiling of 50% of GDP, the proportion of investment and
development spending has dropped sharply only. remaining 15.2% of the total
budget expenditure in 2015, affecting the scale of public investment in areas
necessary to promote labor productivity such as infrastructure, education -
training, and technology.
In that context, the research results in
the monograph "Restructuring the financial system in Vietnam" have
helped to clearly identify the problems of restructuring the financial system
after the crisis, on that basis. propose policy recommendations to continue
restructuring the financial system in an effective manner, more suitable to the
new context of the domestic and world economy.
First, some suggestions on the
format of the Vietnamese banking system after restructuring:
- Clearly define the
structure of state, private and foreign ownership according to the trend of
decreasing state ownership rate.
- Developing
multi-functional financial group models.
- Build the
preconditions for the establishment of an investment bank.
- Separating policy
lending activities from commercial banks.
- Defining the scope
of activities of rural and urban commercial banks.
Second, create leverage for
Vietnamese commercial banks to follow Basel II regulations:
- Supplement the
second pillar through the promulgation of more regulations on supervision and
assessment of the implementation and observance of the capital adequacy ratio
prescribed by banks in the system, and at the same time taking measures to
handle and remedy the situation. for banks that do not meet the capital
requirements as prescribed by the State.
- Supplement
conditions and limits on credit extension for stock investment and trading of
commercial banks and foreign bank branches, and at the same time reducing the
risk coefficient for securities and real estate investment loans.
- Adjust the payout
reserve ratio based on the difference in the liquidity of the reserve assets.
- Supplement the
charter specifying the limit for short-term assets used for medium and
long-term loans.
- Consider amending
the purchase of capital, contribution of shares between parent and subsidiary
companies, affiliated companies, if necessary, may not allow the act of buying
and contributing capital between these companies.
- Promulgate
amendments to regulations on entrustment, holding shares of other credit
institutions or limiting the level of stock holding, classification of subjects
participating in capital contribution of specific credit institutions, and
regulations on share ownership levels. With different shares and shares for
different positions in the Board of Directors of a credit institution, each
credit institution is entitled to contribute share capital according to the
maximum percentage of how many percentages to other credit institutions.
- Issue regulations
on information disclosure time for the Credit Information Center (CIC), and at
the same time improve its initiative.
Third, restructuring Vietnamese
commercial banks according to Basel II:
- Clearly define the
structure of commercial banks according to Basel II standards in accordance
with the characteristics, size, capacity and capabilities of the bank.
- Clearly defining
the implementation of Basel II is an important goal, clearly planning a
strategy for restructuring commercial banks in accordance with Basel II.
- Consider the forms
of restructuring commercial banks according to Basel II.
- Re-establishing
internal regulations, rearranging the banking governance model, risk
management, information management in accordance with the provisions of Basel
II and other regulations of the State Bank.
- Some solutions to
restructure commercial banks can be applied in parallel with the process of
restructuring commercial banks according to Basel II standards.
- Clearly identify
the agency in charge of directing, supporting the implementation and the
participants in the process of restructuring and managing risks of commercial
banks in accordance with Basel II standards.
- State management
agencies in finance and banking should create an environment for the
implementation of Basel II for commercial banks.
- Establishing
relationships and enhancing the role of Basel II as an implementation
consultant in the process of building and perfecting the institution for the
implementation of Basel II; carry out supervisory coordination with the
supervisory body of the Basel Committee.
- Strengthen the
implementation of inspection and control, build a transparent information
disclosure system according to the guidance in the Basel II Treaty.
Fourth, enhance the efficiency of
the restructuring process of Vietnam's commercial banking system:
Increase the rate
of private ownership in banks, even in equitized SOCBs.
- Focus on improving
corporate governance capacity of Vietnamese commercial banks.
- State management
agencies need to study fully, comprehensively and diversify the experience of
bad debt settlement of countries in the region in the restructuring process.
Fifth, some recommendations for
restructuring Vietnam's real estate market:
- Establishing a new
structure of the legal corridor for the formation of a diversified financial
system to support the real estate market.
- Maintain and
develop market structure of rental housing and social housing.
- Increase the use
of tax tools to create revenue for the state budget and as a tool to regulate
the market.
- Develop and
perfect the debt market according to international practices.
- Breakthrough in
structural change of the real estate market: Developing a secondary market for
real estate credit and real estate financial products.
- Promote human
resource training for the real estate market according to international
standards.
Sixth, improve the quality of
information disclosure of listed companies in the process of restructuring the
stock market:
- Complete the legal
framework and guiding document system
- Increase the
enforcement capacity of the market regulator
- For listed
companies: Improve understanding of social responsibility and the importance of
corporate governance.
Seventh, operating fiscal policy:
- Strengthen
supervision of the implementation of fiscal policy
- Strengthen
coordination of fiscal and monetary policy
- Strengthen control
of state budget spending
- Adjust state
budget collection activities
- Develop capital
market
- Strengthening management
of state financial funds outside the state budget
Eighth, it is proposed to adjust Vietnam's
CIT according to international practices.
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