Banks face lack of capital, rising bad debt in 2010

HCM CITY — This year’s primary challenges for Vietnamese banks are rising bad debt and a difficulty in mobilising capital, according to Le Xuan Nghia, deputy head of the National Supervisory Commission.

The volume of bad debts held by domestic banks could increase in 2010 because of the problems faced by enterprises which have invested in outside industries, Nghia told a conference in HCM City yesterday.

Credit growth at domestic banks was expected to be lower than last year as the central bank planned to restrict credit-related activities, he said.

The less attractive deposit interest rates would make capital mobilisation more difficult than last year, Nghia said. Other investment channels such as stock, gold, real estate and insurance and investment funds, however, would be more attractive for investors.

"Pressure on foreign currency liquidity this year still remains a big issue in the country’s economy," Nghia said. Furthermore, in 2010, wholly foreign-invested banks would become further involved in the market, making the competition more fierce, said Le Tham Duong, head of the HCM City Banking University’s Faculty of Banking and Finance.

Changing regulations on capital mobility, credit lending, exchange rate, credit growth rate and the compulsory reserve ratio would also cause difficulties for bankers, Duong added.

Improving staff competence, updating banking technology and developing unique products were tactics local banks should use to raise their international competitiveness, experts said at the conference.

Local banks suffered from poorly trained staff, outdated technology and administrative risks and limited services, Duong said.

Since most Vietnamese banks were smaller than in foreign countries, Duong said, the industry needed to improve its capacity for governance and management, strengthen its risk management and credit control activities to avoid high levels of bad debts.

Duong suggested banks to co-operate more with each other, enhance marketing, build a better trading culture for their organisations and diversify products to mobilise more capital.

He said better service was more important than opening more branches.

Despite 2009’s difficulties, no domestic bank recorded a loss. — VNS