RETAIL BANKING | Cesar Tordesillas, Vietnam

Mergers among weak banks not feasible: Vietnamese official

It was not a viable plan to carry out mergers among weak commercial banks, according to the deputy chairman of Vietnam's National Finance Supervision Committee.

In order to strengthen a weak bank, it was essential to have sufficient funds to clear the bank’s bad debts, Le Xuan Nghia,said, adding that M&A between banks with financial weaknesses and liquidity shortage would make things worse as they obviously lacked funds to wipe out bad debts and already lost trust from depositors.

As a result, Nghia suggested that financially-healthy commercial banks acquire weak ones and vice versa, weak banks should voluntarily seek to merge with large lenders.

Through their M&A with small banks, big banks could take advantage of small banks’ operational network as well as customer base and enjoy future profitable opportunities as shareholders can sell their stock to foreign investors after the weak banks recover.

Besides, experts worried that the actual bad debts in the whole banking sector were much higher than the publicized figures. Nghia commented on the issue, saying that Vietnam has been classifying bad debts differently from international standards.

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