Vital signs of banking improve

The health of the banking system has improved, with good reports coming in about asset quality, capital adequacy ratio and liquidity, according to the National Financial Supervisory Commission (NFSC).

In an overview report of the financial markets in 2013 and the forecast for 2014 published on Thursday, NFSC said that the total bank assets in 2013 increased by 15 per cent.


More importantly, it said, the asset structure had improved, with the share of interbank assets falling from 23 per cent in 2011 to 17 per cent in 2013.

The liquidity of the system also increased with a 23.6 per cent growth of capital mobilisation against the 12.5 per cent increase of credit. Therefore, the loan to deposit ratio (LDR) fell sharply from 98 per cent in 2011 to 85.4 per cent in 2013.

Another important criterion which shows the banking system's good health is when the capital adequacy ratio is always higher than the minimum prescribed level of 9 per cent. In 2013, the capital adequacy ratio reached 12.8 per cent.

NFSC Deputy Chairman Truong Van Phuoc said that while the credit growth in 2013 was higher than 2012, the interest rates were lower. Credit in 2013 rose to 12.5 per cent against 9.8 per cent in 2012. The average lending rates, as calculated by NFSC, tumbled from 20 per cent in 2011 to around 12 per cent last year.

Besides, the credit structure in terms of currencies was more balanced. The credit in Vietnamese dong rose from 81 per cent in 2012 to 85 per cent in 2013, while foreign currency credit fell from 19 per cent to 15 per cent.

In the 2011-13 period, short-term credit accounted for about 58 to 59 per cent, while medium- and long-term credit accounted for about 41 to 42 per cent, showing that there was little change compared with the previous years.

Although credit rose fast, its quality also improved, Phuoc said, adding that the figures calculated by NFSC as per the international rules showed that the NPL ratio of approximately 9 per cent has sound basis.

The NPL ratio of the whole banking system, as reported by the commercial banks, fell sharply from 4.73 per cent at the end of October 2013 to 3.63 per cent at the end of 2013. However, according to the State Bank of Viet Nam (SBV), with prudent calculation, including all subprime loans restructured under Decision 780, the NPL was about 9 per cent.

According to NFSC's report, the credit institutions handled VND106 trillion, or US$5.047 billion, of NPLs, including about VND66 trillion, or $3.14 billion, by risk provisions and about VND44 trillion, or $2.09 billion, by selling to the Viet Nam Asset Management Company (VAMC).

Phuoc believed that VAMC and the risk provision made by banks would partly contribute to controlling NPLs.

He said this year's challenge was the slow recovery of the economy that would restrict the credit absorbability. However, he expected the existing economic policies, which are designed to boost aggregate demand, to create favourable conditions for credit growth.