IMF Reports on the 2017 Article IV Consultation with Vietnam
IMF published its staff report and selected issues report in context of the 2017 Article IV consultation with Vietnam. The Article IV consultation highlights that macro-prudential policies were tightened in Vietnam, while credit growth was robust. Bank reforms have progressed, but nonperforming loan (NPL) resolution, bank recapitalization, and legal reforms to strengthen market discipline have been sluggish.
The staff report emphasizes that the pace of reforms should be accelerated and key reforms to strengthen banks include faster NPL recognition, recapitalization by existing shareholders, including from the budget for state-owned banks, and resolution of nonviable banks. Progress has been made in addressing legacy NPLs as state-owned commercial banks (SOCBs) have reduced their impaired loan ratio (NPLs, NPLs sold to Vietnam Asset Management Company (VAMC), and previously restructured loans) from 13.7% in June 2015 to 5.7% in December 2016. However, progress in addressing NPLs has been uneven among SOCBs. The reported capital adequacy ratio (CAR) is 9.9% for SOCBs and 11.8% for private domestic banks. Although above the regulatory minimum of 9%, reported CARs reflect the reported NPL ratio of 2.46%, not the more broadly defined impaired assets ratio estimated by staff at 8.4%. The full adoption of Basel II scheduled for 2020 will reduce CARs by 200 to 400 bps. The legal framework for bank resolution should be developed and deposit insurance strengthened. The tightening of risk weights for real estate loans and prudential ratios for asset-liability mismatches are welcome. Enhancing the anti-money laundering and counter financing of terrorism, or AML/CFT, framework in line with international standards and its effective implementation will also support financial stability.
The selected issues report discusses the issues related to climate change risks and highlights that the country’s financial system remains bank-centric and dominated by state-owned banks. Non-bank financial institutions are relatively small and are only now being actively nurtured. The four major state-owned credit banks account for 45% of the banking sector assets and provide half of total credit which, despite cutbacks in recent years, remains heavily tilted toward the state-owned enterprises sector. Vietnam could benefit from further financial development, improving access to financial services, and developing capital markets and institutions. The report also discusses the NPL situation in Vietnam and highlights that weak capital buffers make banks reluctant to resolve NPLs.
Related Links
Keywords: Asia Pacific, IMF, Vietnam, Article IV, Basel II, Capital Adequacy, NPL
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
CBRC Publishes Comments on Intermediate Parent Undertakings ProposalRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.