Central bank to monitor banks’ investments more closely
TBKTSG, TT Updated : Wed, June 15, 2011,9:53 PM (GMT+0700) The State Bank of Vietnam (SBV) plans to better monitor commercial banks’ investments, including corporate bonds, lending and investment operations on consignment, heard meeting between SBV and commercial banks last week.
According to this source, SBV found 19 small and medium banks had been involved in high risk operations. SBV also said many of these banks had invested in securities, especially corporate bonds with big outstanding loans many of which don’t have collateral or risk provisions.By late May, the total financial investment value of the 19 small and medium banks, each of which has less than VND75 trillion in total assets, was over VND88.6 trillion, accounting for 15.2 percent of their total assets and increasing by 2.1 percent, or VND1.8 trillion, from late last year.However, compared to the same period last year, the figure has risen by almost 94 percent.Investing in securities of corporations was nearly VND42.7 trillion, making up 48 percent of the total financial investment value and 17.9 percent of the banks’ total outstanding loans.Some banks including GP Bank, TienPhong Bank, Nam A Bank and Kien Long Bank, have invested as much as 80 percent of its outstanding loans in securities issued by corporations.SBV said these banks have also carried out and received investment consignments at high rates in order to avoid the credit growth cap of 20 percent.Of the 19 banks, seven have a consignment balance of over VND500 billion. Operations on consignment are diversified from lending, investment and capital management and investments on consignment account for a big ratio and are of high risk, SBV said.The central bank has also found these banks confiding capital to other institutions or individuals to deposit at other banks to earn high interest rates as another way to help banks avoid the credit growth cap.By late May, total investment and lending consignments at 19 banks had amounted to VND19.74 trillion, or 8.3 percent of their total outstanding loans. The figure fell by 7.5 percent from late 2010 but rose by 460 percent from the same period last year.At the meeting last week, SBV asked these banks to re-assess risks of corporate bond investments to ensure safety and adopt a mechanism for provisions for corporate bonds investments.SBV said it would also work with big banks to get updated on their investments and operations on consignment.
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