JavaScript is off. Please enable to view full site.

​Experts blast Vietnam’s plan to rate banks’ performance for ‘internal use’

Monday, September 18, 2017, 15:17 GMT+7

The State Bank of Vietnam wants to rate banks' annual performance, but make the ratings known only to the credit institutions concerned, a plan experts said makes no sense.

Banks in Vietnam are to be classified into five ratings, A (Excellent), B (Good), C (Average), D (Bad) and E (Weak), the central bank said in a draft circular on conducting credit ratings for credit institutions and foreign banks.

The ratings will be determined based on a set of criteria, including capital, assets, administrative management, liquidity, and business results.

According to the bill, by June 30 every year the governor of the State Bank of Vietnam will approve the final ratings for banks based on the previous year’s performance.

However, the draft circular states that the results will not be made public on the central bank’s website; instead, each of the rated institutions will be privately informed of their rating.

The central bank explained that the ratings contained ‘sensitive information’ that should not be widely publicized.

It also said that in other countries, the ratings of credit institutions remain undisclosed to the public.

The draft regulation has sparked concern among local banking experts and customers, who wonder what the point is of rating banks and keeping the public in the dark about the results.

Ratings must be publicized

Nguyen Khac Quoc Bao, dean of the finance department of the University of Economics Ho Chi Minh City, said conducting credit ratings for banks and publicizing the results is common practice internationally.

“Bank ratings are an essential means of increasing the transparency of the banking system as it allows people to understand the ‘health’ of a credit institution, particularly its risk level,” Bao told Tuoi Tre (Youth) newspaper.

“Once people know the risk level of a bank, they will know where to put their money.”

Bao said it was understandable that the central bank wants to keep bank ratings secret for fear of rattling the market, but that seemingly cautious move would lead to problems, he suggested.

“What if the information the central bank tries to keep secret is leaked to the market?” he asked.

This point was echoed by Tran Minh Hiep, a lecturer from the Ho Chi Minh City University of Law. Hiep said the ‘for internal use only’ rating information, once leaked, would “cause even more instability in the market.”

Banking expert Bui Kien Thanh said that customers need to know if a bank is 'healthy' before depositing money there.

“Similarly, it is crucial for businesses to understand a bank’s liquidity before deciding to take a loan there,” he said.

Bao, from the University of Economics, also underlined the necessity to rate banks and publicize the ‘health’ of credit institutions to the public.

“There is a misconception that banks in Vietnam will never go bankrupt because they are all backed by the central bank,” Bao elaborated.

“Most people will therefore care less about a bank’s risk level than its interest rate offer, while there are in fact weak banks that accept deposits in high interest rate accounts only to record losses.”

Bao said banks should see the ratings as a motivation for them to improve their performance, rather than a ‘sensitive thing.'

“As for banks with strong performance, the ratings will be another means for them to boost their reputation and fortify their positions in the market,” he added.

“Bank ratings are a time- and money-consuming task and for no reason should the State Bank of Vietnam perform them only to keep the results for ‘internal use only’.”

Like us on Facebook or follow us on Twitter to get the latest news about Vietnam!

TUOI TRE NEWS

More

Read more

;

Photos

VIDEOS

Experience summer sand-boarding in Mui Ne

Sand-boarding, a popular activity amongst local children in the coastal tourism town of Mui Ne in south-central Vietnam, is attracting hundreds of tourists to the Red Sand Dunes

Young maple trees given better protection as Hanoi enters rainy season

The trees are currently growing well, with green leaves and healthy branches.

Hunting skinks for food in southern Vietnam

Skink meat is known to be soft, tasty, and highly nutritious.

Vietnamese-made app allows people to grow real veggies via smartphone

Nguyen Thi Duyen, a young engineer in Hanoi, developed the app and its related services to help busy people create their own veggie gardens.

Chinese tourists hit by Vietnamese over dine and dash

Four Chinese were reportedly injured, with one having a broken arm.

Latest news