July 05, 2017

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

Staff Report (PDF)

Selected Issues Report (PDF)

Keywords: Asia Pacific, IMF, Vietnam, Article IV, Basel II, Capital Adequacy, NPL

Related Articles
News

FSB to Evaluate Effects of Too-Big-To-Fail Reforms for Systemic Banks

FSB is seeking feedback as part of its evaluation of the effects of the too-big-to-fail reforms for banks.

May 23, 2019 WebPage Regulatory News
News

APRA Releases Minor Changes to Reporting Standards on SA-CCR for Banks

APRA released minor changes to the three reporting standards for the standardized approach for measuring counterparty credit risk exposures (SA-CCR).

May 22, 2019 WebPage Regulatory News
News

APRA on Industry Self-Assessments into Governance and Accountability

APRA released an information paper analyzing the self-assessments performed by 36 of the country’s largest banks, insurers, and superannuation licensees in response to the final report on the Prudential Inquiry into the Commonwealth Bank of Australia (CBA).

May 22, 2019 WebPage Regulatory News
News

PRA Consults on Maintenance of TMTP Under Solvency II

PRA published a consultation paper (CP11/19) that sets out its approach to update supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTP) under Solvency II.

May 22, 2019 WebPage Regulatory News
News

APRA Proposes to Amend Guidance on Residential Mortgage Lending

APRA is consulting on revisions to the prudential practice guide APG 223 on residential mortgage lending in Australia.

May 21, 2019 WebPage Regulatory News
News

IASB Proposes Improvements to IFRS 9 and IFRS 16

IASB published the exposure draft ED 2019/2 that proposes amendments to four IFRS standards, including IFRS 9 on Financial Instruments and IFRS 16 on Leases.

May 21, 2019 WebPage Regulatory News
News

Denis Beau of BDF on Supervisory Priorities for Climate-Change Risks

Denis Beau, the First Deputy Governor of BDF, delivered opening remarks at the BCBS-BSCEE-FSI High-level Meeting for Europe on banking supervision.

May 21, 2019 WebPage Regulatory News
News

ISDA CDM to be Deployed for UK Digital Regulatory Reporting Pilot

ISDA announced deployment of the ISDA Common Domain Model (ISDA CDM 2.0) to support the UK FCA, BoE, and participating financial institutions in testing phase two of the Digital Regulatory Reporting pilot for derivatives.

May 21, 2019 WebPage Regulatory News
News

MAS to Consolidate Regulation of Merchant Banks Under Banking Act

MAS published a consultation paper that proposes to consolidate the regulation of merchant banks under the Banking Act and to move merchant banks to a licensing regime under the MAS Act.

May 21, 2019 WebPage Regulatory News
News

ESAs Amend Technical Standards on Mapping of ECAIs Under CRR

ESAs published a second amendment to the implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation (CRR).

May 20, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3118