The State Bank of Vietnam (SBV) has recently issued Circular No. 35, guiding the disclosure of the information on banking operations, including of bad debts of the entire banking system, local newspaper Tuoi Tre (Youth) quoted Dao Minh Tu, chief of the SBV Secretariat, as saying on November 14.
Under the circular, the central bank will disclose five out of 12 core Financial Soundness Indicators (FSIs) under the International Monetary Fund (IMF)’s standards: Capital adequacy ratio (CAR); Non-performing loans to total gross loans; Sectoral distribution of loans to total loans; Return on assets (ROA) and Return on equity (ROE) of the entire banking sector.
Tu said: “This is a new and very important step of Vietnam aimed at publicising and making information more transparent on monetary and banking activities. In the current context of the economy, the disclosure of information is a necessary step to increase transparency and confidence in the banking system, as well as develop a healthy, safe and efficient banking system. Also, this is a way to help better protect the interests of depositors and investors”.
According to Tu, these standards have drawn special attention from the World Bank and foreign investors, who always wish Vietnam to disclose them so far. With this circular, these standards will be published fully, formally and monthly, quarterly, biannually, and annually depending on each kind of the indicators. In unusual circumstances, these standards may be announced extraordinarily. The disclosure of the standards will uncover more clearly the performance quality of commercial banks.
“If the indicators are good, people will have good information to place their trust in banks, but if not good, this will be also a pressure forcing banks to take measures to get the trust and boost fair competition to continue to grow,” said Tu.
According to the State Bank, the disclosure of the information on banking operations is one of the official actions in Vietnam’s negotiations with the World Bank (WB) in the framework of the Poverty Reduction Support Credit No. 10 (PRSC 10).
The Circular will take effects from April 1, 2012.