Banks' indifference to risk management could prove costly: expert

TN News

Email Print

Most partly private banks in Vietnam have ignored risk management practices and this could place the country's financial system as a whole in peril, a senior official says.

"Many banks completely skip risk management processes," Le Xuan Nghia, vice chairman of the National Financial Supervisory Commission, told Thanh Nien.

"I have just finished inspecting three new banks, and their risk management policies are not longer than six pages," he said. "I was completely shocked."

Nghia said risk management departments at many local banks exist, but in name only. "If the situation continues, what will happen to the local banking system?" he asked.

More than VND10 trillion (US$527 million) has been used to save local banks from going bankrupt, but then they continued to expand lending with no care for bad debts, Nghia said.

Local banks reported an average of only 1.28 percent of their loans were nonperforming, but in fact the bad debt ratios at some banks were 12-14 percent, he said, adding the ratios could be  even higher if international standards were applied.

"International agencies have warned Vietnam about a financial crisis," he said. "I have reported to Prime Minister Nguyen Tan Dung about the risk. It can be a crisis in the balance of payments first, and then a financial crisis."

The World Bank said in a report on the East Asian economy in April that there were "unusually large errors and omissions in the balance of payments by about 10 percent of GDP".

Nghia told Thanh Nien that there were actually errors amounting to $12 billion.

More Business News