International Workshop: Banking Restruction - International Experience and Policy Implications for Vietnam

On 21st December 2011, at International Convention Center, VNU University of Economics and Business, National Financial Supervisory Committee and Deposit Insurance of Vietnam have co-organized the above mentioned workshop.

Attending to the workshop was many distinguished guests from ministries, institutes, national and international organs.

Dr. Vu Viet Ngoan open the workshop.


Ms. Victoria Kwakwa, WB Country Director in Vietnam , delivered a speech at the conference

Over 250 representatives and 40 reporters attend to the workshop.

The Organizing Board has received nearly 30 articles by researchers, policy makers as well as specialists in the country and abroad, in which there are 5 articles presented at the workshop, including:

1. “Banking sector restructuring - lessons from international experiences” by Mr Sameer Goyal ,Vietnam country coordinator, Financial and Private Sector Development, South East Asia and Pacific Region, World Bank;

2. Zeroing in on a new landscape for credit institutions in Vietnam by Dr Ha Huy Tuan, Vice Chairman of NFSC;

3. Banking restructuring – International Experiences and Policy implications for Vietnam by Assoc.Prof. Dr Nguyen Hong Son, Rector of VNU University of Economics and Business;

4. Role of Deposit Insurance in Bank Resolution: International Guidance & Taiwan experience by Ms. Yvonne Fan, Head of International Relations and Research Office of the Central Deposit Insurance Corporation (CDIC), Chairperson of Research and Guidance Committee of the International Association of Deposit Insurers (IADI);

5. Banking restructuring experiences from South East Asia countries by Dr. Can Van Luc, Head of Transaction Office 3, Bank for Investment and Development;

The reports and initiatives raised at the workshop mainly discussed on: International experience on the reasons of banking restruction; The implementation/models of banking restruction; Banking restruction methods; Challenges and risks during the restruction; Assessment of banking restruction; The conditions of banking restruction in Vietnam; And rearrangement of banking system after restricting.

Mr. Sameer Goyal

Mr. Sameer Goyal (Vietnam country coordinator, Financial and Private Sector Development, South East Asia and Pacific Region, World Bank) has shared the international experience of banking restruction and emphasized that the restruction should devided into 2 objective stages: short-term and long-term objective. In particular, short-term objectives aim at maintaining the stability of banking system; ensuring the affordability as well as the smoothness of payment duration and financial intermediary; dealing with existing issues in time to avoid the spread or systematic problems; restoring the confidence in banking system; building a soperationecure network; minimizing costs to restructure the central bank, deposit deposit insurance and/or government. Meanwhile, long-term objectives aim at building a new governance framework; improving the competitiveness and strengthening the resilience as well as the overall infrastructure of the financial system.

Dr. Ha Huy Tuan

According to Dr. Ha Huy Tuan (Vice Chairman of NFSC), undergoing the phases affected by regional and world’s crisis, the standards and conventions for macro safety and risk-based supervision has been degraded in the financial system of Vietnam’s banks. The reasons for this are partly due to the looseness and disconnect among banking systems and asset markets such as real estate, securities and authorities. Particularly, the main cause is that supervisory authorities are operated independently according to specialty or institution. In other words, it still lacks a financial macro supervisory agency which has enough authority and power to warn, prevent and treat the risks of the financial system. This context not only poses problems for Vietnam to restructure the economy but also brings about an urgent requirement of a comprehensive banking system restruction of as a key element to ensure the rapid and sustainable development.


Dr. Bui Khac Son

However, banking restruction is a new and complicated issue, which is “hot” not only to the banking sector but also for the whole economy. Vietnam's banking system is currently facing a lot of risks, causing several concerns for the society in general and depositors in particular, as quoted by Dr. Bui Khac Son, (General Director of Deposit Insurance of Vietnam). Therefore, the study of international experience to find out the best practices of the role of deposit insurance and how to protect depositors during the restructuring process has a great importance in the policy recommendation for restructuring the banking system in Vietnam.

Speaking at the workshop, Dr. Vu Viet Ngoan believed that previously, banking restruction process is successful when banks have finalized with bad loans through a standard and strict supervision regulation. However, the short existance causes the risks, additionally, it needs the restructuring plan of the State Bank, Financial Supervisory Commission as well as an independent scheme to Prime Minister to monitor the implementation.

Assoc.Prof.PhD. Vo Dai Luoc

Assoc.Prof.PhD. Vo Dai Luoc (Director of the Executive Office, KX01 Program cum former Director of the World Economy and Politics Institute) has shared that currently the world’s best banking system is of Canada rather than East Asian countries. Particularly, Vietnam, banking restruction is firstly to restructure the State Bank first, the central bank must be independent to match the market economy. Therefore, it should have a plan for restructuring the central bank in functions and roles.

Many other reviews have highlighted the difficulties and challenges in the process of restructuring the banking system, the lessons learned from other countries in the region and the world to implement bank restruction. Assoc.Prof.PhD. Nguyen Hong Son, Rector of the VNU University of Economics and Business has emphasized the

Assoc.Prof.PhD. Nguyen Hong Son

risks during the banking restruction when studing international experience, such as: The longlast risks due to the lack of legal and scientific base; the losing of confidence in the banking system by the implicit guarantee of state owned their clients; difficulty by conflicts of interest arising in the course of restructuring, conflicts related to the interests of depositors and shareholders interests of different groups; the conflicts of rights during the restruction; risks after restructuring...

At the workshop, attendances have discussed about the selection of restruction model for Vietnam banking system, the approach in the restruction process, banking system format after restruction, the relation between restruction of commercial banks and the Central Bank from studying the experience of Southeast Asian countries, Japan, Korea and Taiwan.


Ms. Yvonne Fan

Ms. Yvonne Fan has shared precious experience of the role of deposit insurance in Taiwan to handle bank failures. She concluded that an effective system of deposit insurance is an important link in protecting is the key to the success of deposit insurance systems and encouraged CDIC member organizations should reference “the basic principles of effective deposit insurance system” to develop appropriate legal frameworks, reinforcing the role of deposit insurance in the banking restruction.

After the effective working session, the workshop has inspired a new scientific forum, promoting further discussion and research on restruction of banking system in Vietnam, contributing to the perspective theoretical framework, and policy recommendations in order to successfully implement the banking restruction process in Vietnam.

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REFERENCES:

  • Banking sector restructuring - lessons from international experiences (Vietnamese, English). Author: Sameer Goyal ,Vietnam country coordinator, Financial and Private Sector Development, South East Asia and Pacific Region, World Bank

  • Zeroing in on a new landscape for credit institutions in Vietnam(Vietnamese, English). Author: Ha Huy Tuan, Vice Chairman of NFSC.

  • Banking restructuring - International Experiences and Policy implications for Vietnam(Vietnamese, English).  Author: Nguyen Hong Son, Rector of VNU University of Economics and Business.

  • Role of Deposit Insurance in Bank Resolution: International Guidance & Taiwan experience(Vietnamese, English). Author: Yvonne Fan, Head of International Relations and Research Office of the Central Deposit Insurance Corporation (CDIC), Chairperson of Research and Guidance Committee of the International Association of Deposit Insurers (IADI).

  • Banking restructuring experiences from South East Asia countries (Vietnamese; English). Author: Can Van Luc, Head of Transaction Office 3, Bank for Investment and Development;


Luu Mai Anh - Tran Thanh Tu Photos: Do Chiem

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