[ECONOMICS] Banking in VN

[Thanh <thanh@lombok.cs.uwm.edu>]

Hi all:

I remember that there are several banking experts in our list. Could you
comment on the news bellow?

There are a lot of talk about reforming VN banking system. In my
opinion,
there should be talk about how to create one. In general, I always
wonder if
there is real banking in VN at all. I mean nobody realy uses bank
accounts
for their financial needs unless they are forced to by government
regulation.
Perhaps that is a legacy of long lasting wars. People do not trust their
saving to anyone but themself. Or perhaps that is the legacy of
centralized
planning. Money was considered merely as a bookeeping instrument of the
state.

I heard news about the introduction of the latest banking technology to
VN:
smart cards, ATM, credit card etc. That might be the easy part. Building
people trust in banks (be it state owned or private) will be much harder
and
much more time consuming. HOw long will it take? any idea?

Cheers,

-Thanh.

---------- Forwarded message ----------
Vietnam faces bad loan crisis, say economists

Mar. 24, 1997
------------------------------------------------------------------------

HO CHI MINH CITY -- Top bankers and economists in this southern
city are warning that Vietnam's banking system faces a major bad
loan problem, following failed property speculation by domestic
firms.

In a series of interviews over the past week, banking executives
and others painted a picture of an industry owing millions of
dollars as a result of bad debts, and saddled with near-worthless
collateral.

They said a handful of companies had used influence and
connections to secure huge multiple loans from both joint-stock
and state-owned commercial banks to finance real estate deals
during the early 1990s, mostly through letters of credit.

A property market downturn since 1995 has left these companies
and individual lenders unable to repay banks.

The banks, in turn, were having to delay repayments on letters of
credit because collateral on the loans was taken in the form of
real estate, which is losing value and tangled in the red tape of
Vietnam's archaic land ownership laws.

"We should blame the property speculators," said an industry
source who requested anonymity.

"They tried to create monopolies in the real estate sector.
They're the ones who should be paying the price now that it's
gone wrong."

Official figures for the sums involved were not available, but
some bankers spoke of debt levels of around US$1 billion (S$1.45
billion). An estimate by a senior banking executive put total
overdue payments at around US$500 million.

"It's a serious problem," said banking operations director Tran
Trong Do of the central State Bank of Vietnam. "Due to our poor
experience in supervision, big problems have been caused for the
national banking system."

Economists and academics said trouble has been looming in
Vietnam's still-nascent banking system for some time because of a
number of shortcomings, including lax management and corruption.

An indication of the problems arose last month when the
Joint-Stock Commercial Bank for Private Enterprises (VP Bank)
came under scrutiny for extending the payment period under a
letter of credit to South Korea's Ssangyong.

But economists said the problems at private banks such as VP
paled in comparison to the level of debt in state-owned
commercial banks.

The Tai Chinh and Thi Truong newspaper warned early this month
that the problem had reached the point where state intervention
was needed "immediately to save a chain reaction collapse of the
whole banking system".

But an international economist in Hanoi downplayed the magnitude
of the problem, saying the fundamentals of the banking system
remained reasonably healthy.

"I think it's too early at this stage to talk about it as a
crisis," he said. -- Reuter

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