Firstly, the credit-banking market has grown strongly in size, with the bank's loan-to-GDP ratio increasing beyond 110% of GDP in 2019 and continuing to be the dominant market in a system. Banking-based finance like Vietnam. The credit balance of private banks increased by more than 7 times in the 2010-2020 period and is the main source of capital for the economy. The highlight of Vietnam's credit institution system is 4 large commercial banks (VCB, BIDV, Vietinbank, Agribank) accounting for over 50% of the total credit balance, about 45% of the total assets and mobilized capital of the whole Vietnamese credit system. Male. The monetary and banking market of Vietnam has grown strongly in size, increasingly promoting its important role in regulating capital of the banking system; At the same time, it is a fast, accurate and effective channel of monetary policy to the banking system in particular and the whole economy in general. However, if compared with other countries in the region, the size of the money market - banking of Vietnam is small. The ratio of private credit / GDP of Vietnam is lower than Malaysia and Singapore at 20-30 percentage points, compared with only 36.5% of Indonesia. However, considering the number of ATMs / 100,000 adults it can be seen, the ability to access the money market - banks in Vietnam is relatively low (24 ATMs / 100,000 adults) compared to other countries in the region (59 in Singapore; 52 in Malaysia and 50 in Indonesia).
Secondly, banking products and services are increasingly diverse and rich with high added value, based on modern technology and payment systems. However, the products and services of Vietnamese commercial banks are still poor, lacking management institutions according to international standards such as risk management, debt management, assets, customer groups, and types. product, internal audit. Regarding the derivative money market, there are still some limitations such as only a few Vietnamese commercial banks deploy monetary derivative financial instruments while the tools are not abundant and utility so the number of customers participating is still modest or most commercial banks have not really paid attention and invested properly to effectively implement monetary derivative financial instruments.
Although there has been a strong development in the process of international economic integration, the money and banking market still faces some difficulties and challenges. Specifically:
Capital for Vietnam's economy still depends on the banking sector. The ratio of total assets of the credit institution / GDP system is much higher than that of other countries with similar development level in the region, suggesting that when the banking sector fails to perform well the function of capital raising, the economy Weakness will be strongly reduced and vice versa, the banking system will be vulnerable when macroeconomic instability. By the end of 2019, the ratio of total assets of the credit institution / GDP system reached 1.74 times and the ratio of outstanding loans to the economy / GDP was approximately 98.2%. Consequently, in the portfolio of banks' assets, accounting for the largest proportion is still credit activities. Although the credit quality has been gradually improved, the bad debt ratio is still high and there are potential credit risks.
The financial potential, quality of products and services as well as management capacity of Vietnamese commercial banks are still low compared to other countries in the region and around the world. The scale of domestic commercial banks is too thin. The charter capital of Vietnamese commercial banks is in the range of USD 133 million to nearly $1.8 billion (as of the end of 2019), much lower than many commercial banks in the region (for example, Mitsubishi UFJ Bank has the capital up to $1,770 billion, United Overseas Bank of Singapore 13,4 billion SGD ...). In terms of total assets, the total assets of some of Vietnam's largest commercial banks are in the range of US $ 25-30 billion (at the end of 2019), only one-tenth the size of UOB Bank of Singapore. ($306 billion), 1/5 of the assets of Maybank Malaysia ( $146 billion), and nearly one-third of the assets of Thailand's Kasikorn Bank ($72.5 billion), Bank Berhad Malaysia ($78 billion USD).
Increase capital and ensure financial capacity to meet the standards of Basel II. Banks with a Capital Adequacy Ratio (CAR) of around 9% will have to consider the plan to raise Tier 1 or Tier 2 capital. In order for CAR to increase 1%, the bank's charter capital must increase by 8-10%. The above facts show that most Vietnamese commercial banks are in a dilemma when implementing capital raising measures to ensure financial capacity. If the capital increase is made by reducing or not paying cash dividends, there may be objections from shareholders and under the new regulations in Circular 61/2016 / TT-BTC, all dividends of State shareholders should be transferred to the state budget. If the issuance of additional shares to existing investors, attracting more investors, and selecting foreign strategic investors will face difficulties in the context of the complicated world economy, International financial markets fluctuate unpredictably and capital flows are tending to shift from emerging markets to stable, transparent and low-risk markets.
The challenges in perfecting the way to calculate Vietnam's NPLs in accordance with international standards in order to correctly identify the level of risk to the monetary - banking market. The bad debt ratio calculated according to Vietnam's accounting standards in 2016 was 2.58%, however, this figure does not include the bad debts that have been temporarily sold to VAMC for a period of 5 years from 2012. The problem that Vietnam encountered in the process of identifying bad debts is that it is difficult to determine the solvency of customers. Most commercial banks have not or are piloting this method. Therefore, the possibility of deficiencies in identifying bad debts in commercial banks remains, making the reported debt of commercial banks according to VAS standards much lower than international standards. This poses a challenge to perfect Vietnam's NPL calculation in accordance with international standards to correctly identify the level of risk to credit safety.
The current supervision is still mainly in compliance monitoring, the content of monitoring is not comprehensive, and there is a lack of effective tools for risk-based monitoring. Models of quantitative analysis, warning, risk testing (such as early warning model (EWS), endurance test model (ST) and model of determining the risk of loss (VAR) ) less developed and applied, therefore, the effectiveness of risk assessment and warning for each CI as well as the whole system is not high timely detecting critical and unrealized risks positive contribution in strengthening the quality of on-site inspection activities
In the following years (2020-2023), the world and regional economy are expected to recover slowly, unevenly and with many difficulties, accompanied by many potential instability factors, especially after COVID-19 pandemic. In the country, the process of restructuring the economy associated with renewing the growth model has achieved initial results, the economy has gradually regained its momentum of growth and recovery, macroeconomic balances are more stable, inflation is curbed. Domestic demand and export growth are likely to maintain a stable trend in 2019, creating a driving force for Vietnam's economy to continue growing GDP in 2021, and subsequent years is forecast to reach around 6, 7 - 7%. However, the domestic context also reveals some disadvantages, potentially affecting macroeconomic stability in the coming period. The implementation of existing free trade agreements and participation of new-generation free trade agreements, along with the formation of the ASEAN Community in 2015, opened many favorable opportunities for development but also placed There are many difficulties and challenges in controlling capital flows and macroeconomic stability.
In that context, Vietnam's socio-economic development strategy by the end of 2020 defines the mission as prioritizing the objectives of macroeconomic stability, ensuring social security and rational growth. , accompanied by the renovation of the growth model, carrying out an overall restructuring of the economy. Decision No. 1572 / QD-NHNN dated August 11, 2014, of the SBV promulgating the SBV's Action Plan to implement the Government's Resolution No. 19 / NQ-CP of March 18, 2014, on tasks and solutions The main measures to improve the business environment and enhance national competitiveness also set the target of "Focusing on perfecting the monetary institution, raising the position of the State Bank in the planning and implementation of key efficiency." monetary policy to stabilize the value of money, control inflation, contribute to macroeconomic stability and economic growth. At the same time, to fundamentally, thoroughly and comprehensively restructure the system of credit institutions so that by 2020, to develop a system of versatile credit institutions in the direction of modernization, safe and solid performance with a multi-structure type of ownership, size, type.
In the period of 2020-2023, it is necessary to improve the efficiency of operating interest rate instruments, improve the efficiency of operating interest rate instruments, continue to operate the open market operation in the direction of being a liquidity support tool to ensure interest rates on the interbank market close to the market-oriented interest rates of the State Bank (SBV); continue to apply flexible exchange rate mechanism, consistent with the supply and demand of foreign currencies in the country and developments in the international market. The management of the State's foreign exchange reserves needs to be renewed in a way that is consistent with international practices, ensuring the harmonization of safety, liquidity and profitability goals, and continue to implement measures to limit the dollarization in the economy. Accordingly, in order to sustainably develop the banking currency market in international economic integration, the following solutions should be focused:
Perfecting mechanisms and policies for managing and supervising the monetary and banking market in accordance with international practices in the direction of increasing the independence of banking inspection and supervision units and aiming at a model Independent monitoring in the long term. At the same time, step by step implementing the combination of compliance inspection with risk-based inspection based on the principle of inspection and supervision of the whole. Enhance the effectiveness of the combination of remote monitoring and on-site inspection by developing an early warning program (EWS), improving the quality of the data and information systems used in monitoring. remote control, ensure information transparency, and enhance risk monitoring efficiency.
Minimize risks to the bank-dependent financial system by stabilizing the money-banking market and dealing with liquidity risk; At the same time, diversifying forms of capital used to minimize the risk of bank losses due to focusing too much on credit activities. Specifically: strengthening supervision measures of the State Bank for the business activities of commercial banks, especially the group of joint-stock commercial banks with small scale and ineffective business; Ensuring the liquidity safety of commercial banks in the system by setting appropriate liquidity reserve ratios on the basis of determining the liquidity needs of commercial banks according to the capital structure method and diversify products and services of the money market in the direction of in-depth development. Accordingly, besides the traditional service of credit, commercial banks should focus on developing other business areas such as factoring, financial leasing, export finance, acting as an agent for issuing securities. through member securities companies, guarantees for bond issuers, long-term bonds, and other non-credit services (personal financial advice, interbank payments, investments in internet banking, developing forms of payment through electronic tools).
Improve the competitiveness of Vietnamese commercial banks to meet the requirements of stable and effective development in accordance with international standards and practices. Increasing equity through increasing the charter capital of Vietnamese commercial banks is a solution that should be considered for banks to have a higher capital scale, meeting the requirements of capital adequacy according to Basel II and Basel III in the coming years. Commercial banks should develop a capital-raising strategy together with rational capital use to ensure sustainable capital development and reduce the pressure on dividends to shareholders due to massively increasing capital but no plan. specific and effective use plans. In addition, the solution to increasing capital by selling shares to foreign strategic investors should be considered by foreign investors with strong financial resources and management experience, especially weak banks. least. However, in the selection of strategic partners, it is necessary to select the partners in accordance with the goals of each bank. In the long run, increasing equity should be done through increased profits from business operations. Therefore, commercial banks need to improve business efficiency and complete profit distribution policy in accordance with the business characteristics of each commercial bank and the law.
Improving Vietnam's debt classification standards according to international standards (IAS), and at the same time, improving the supervision and enforcement capacity of debt classification regulations, ensuring safety and efficiency. the result of the entire banking system. At the same time, it is necessary to accelerate the process of restructuring credit institutions to support the handling of bad debts. In addition, combining the handling of bad debts with the implementation of measures to prevent and limit newly arising bad debts and improve the credit quality of credit institutions; completing and promoting the role, functions, and duties of VAMC's Asset Management Company.
In the long term, it is necessary to further accelerate the process of interest rate liberalization, in order to ensure the function of capital market orientation through interest rates. However, the removal of the ceiling interest rate ceiling should be carried out according to the roadmap, accordingly, consider removing the deposit rate ceiling in 2017-2018 while continuing to maintain the lending interest rate ceiling to support remove difficulties for businesses, especially in 5 priority areas. However, in the long term, it is advisable to gradually remove the lending interest rate ceiling in order to liberalize interest rates, in order to ensure the function of capital market orientation through interest rates. In addition, in order to minimize the risk of interest rate liberalization, the removal of deposit and lending interest rate ceilings, the following conditions must be ensured: Removing the interest rate ceiling must be associated with administration. refinancing rates to create flexibility and increase the orientation of monetary policy to market rates; The process of restructuring the banking system and solving bad debts in order to strengthen the credit institutions in the system and create confidence in the market & Enhance the capacity to supervise the money market and the banking system based on the application of international standards on inspection and supervision of institutions operating in the market.
Alice Hoang - Vietnam Credit