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Decision to halt licencing banks: better late than never   2008-08-15 - DTCK

The decision by the State Bank to halt licencing banks surprised many bankers. However, the decision is considered a suitable move in the current conditions.


When asked to comment about the decision to halt licencing banks, a government official said that a lot of joint-stock banks have been facing big difficulties. Some of the banks have had to adjust profit targets for 2008. He said the difficulties have affected the national economy, and that it is now necessary to upgrade banks to meet the requirements of the integration period.


The official said that the State Bank will consider heightening the requirements on capital. For example, the current regulation stipulates that banks must have the minimum chartered capital of VND1tril, and the required capital level may be raised to VND2,000 or VND5tril.


Moreover, the central bank will also consider amending other regulations, including ones related to institutional shareholders and banks’ financial requirements. However, the official said that the central bank should set new regulations soon, or investors will have to spend a lot of time establishing banks, resulting in wastes of time and money.


Dr Lawyer Tran Dinh Trien, Head of the Vi Dan Law Office, said that the decision on halting licencing banks came a bit late, but it is better late than never. Prior to that, when talking to the press about how many banks Vietnam should have, Trien said that Vietnam should not set easy conditions for new bank establishment. Trien said that how many banks is not important: the most important thing is the quality of banks.


Trien thinks that a lot of banks in Vietnam now have too little capital, while they have opened too many branches. It is understandable that banks want to open more branches because they want to expand their market shares. However, the opening of more branches while they have little capital will do more harm than good.


Trien said that the question put to state management agencies now is whether to allow small banks to be established. And he thinks the answer should be ‘no’. What the central bank needs to do now is to limit the number of exceedingly small banks, set higher requirements on banks’ chartered capital, and force them to improve their management capability, which would help them improve their competitiveness.

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