Vietnam banking system at high risk, says S&P Dean Yates
Hanoi, January 24: Vietnam's banking system is likely to remain vulnerable and at risk as the government reforms the sector in line with international standards, Standard & Poor's said on Monday. In the past year the government had established some foundations for the development of a robust banking sector, but effective implementation of recent initiatives combined with deeper reforms were needed, the ratings agency said. It said implementation of strengthened asset classification and provisioning standards along with progress toward setting up an entity to buy bad bank debts was evidence of Hanoi's commitment to bank reform, albeit at a measured pace. But poor disclosure made it difficult to assess progress. "Asset quality is weak, disclosure poor, risk management systems underdeveloped, and despite recent liberalisation efforts, the market remains highly regulated," S&P Said in a country report on Vietnam, obtained by Reuters. "The move toward more conservative prudential standard show evertentative is welcome, but combined with less robust economic growth will inevitably result in increased volatility in the sector." ".During this transition, the Vietnamese banking system is likely to remain at the highest end of the global industry risk spectrum," the report added. The report comes at a time when Vietnam is experiencing its lowest growth in a decade. The World Bank has said Vietnam might only grow 3.5 percent this year and three percent thereafter if Hanoi does not accelerate economic reforms. Central bank governor Le Duc Thuy has estimated total overdue bank loans at some 14.5 percent of outstanding credit, but S&P Said the figure would be much higher if calculated by international standards. It did not give its own estimate.The agency said there was a need for more disclosure and transparency, a headache for all businesses in Vietnam. "Much of the industry data is covered by secrecy laws, and meaningful information on the sector...and on individual Financial institutions has typicallynot been available." Copyright © 2000 Indian Express Newspapers (Bombay) Ltd. All rights reserved throughout the world. feedback at financialexpress.com