April 27, 2018 09:43

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State Bank ranks credit institutions: Why is not it published?

10:18 | 26/09/2017

VCN- The State Bank is seeking comments on the draft of circular on ranking the credit institutions and branches of foreign banks (CIs) in replacement of Decision No. 06/2008 / QD-NHNN dated March 12, 2008, regulates the classification of commercial joint stock banks.

state bank ranks credit institutions why is not it published
This is a task of the State Bank in banking inspection and supervision, but it is also mixed opinion that SBV will not publicly announce the rankings.

Internal nature

Over time, the system of credit institutions in Vietnam is still ranked by many independent rating agencies, even it was rated quite high. Typically, in early May, the Moody's rating agency has published a ranking list of commercial banks in Vietnam, including the 8 banks were ranked B1 by Moody's. Most recently, in early September, Standard & Poor's (S & P), a global credit rating agency, has raised the ratings of some commercial banks up "stable". In Vietnam, the agencies of independent credit rating do not have much prestige, so the number of active organizations is very limited. Currently, only the Top 10 Vietnam Commercial Banks ranked in 2017 by the Vietnam Report Corporation (Vietnam Report) received the attention of the financial - banking industry after the company organized annual events from 2012.

Therefore, as soon as the State Bank announced the drafting of the credit institutions, the banking experts are highly appreciated because this will be a turning point in banking checking and supervision with a view to helping management of banking system based on the inspection, risk management and liquidity of banks rather than reliant on compliance of inspection as before.

However, the issue of worth debating here is that the ranking results have not been announced on the SBV's website due to the sensitive nature of the disclosure. At the same time, the quality of the classification is not guaranteed accurately, mainly based on the results of self-classification of the commercial joint stock banks’ report. Therefore, the Draft Circular does not stipulate that the State Bank must announce the classification of credit institutions and the State Bank shall only announce rating results for each CI. The state Bank supposed that according to the study and consultation with international organizations (WB, JICA), there are no countries in which the regulators announce ratings of credit institutions. Therefore, the State Bank affirmed that the ranking of credit institutions to serve monetary security, system safety; warning timely and minimizing the risk of breakdown to protect depositors' rights.

According to economist Dinh Tuan Minh, the fact that the State Bank’s no announcement of the rating results is justified, as it can be considered as an internal regulation for management purposes and running. This activity is similar to the assessment and classification of customers of enterprises or the credit institutions to decide whether to lend or not, loan ratio and repayment term.

Moreover, experts also said that this decision is in line with international practice. Because of different purposes, the central banks and the financial supervisors in many countries around the world do not widely publicize ratings of credit institutions such as domestic and international credit rating agencies. made periodically. Typically, the Reserve Bank of New Zealand (NHTU) just released credit ratings of three prestigious rating agencies, Standard & Poor's, Moody's and Fitch Ratings on credit institutions

Need more organizations of independent rating and ranking

Although there is the quite reasonable cause, according to economist TS. Bùi Kiến Thành, the regulators are responsible for monitoring the operation of the bank, so as soon as the credit institutions are found weekly, the State Bank should publicize so that people know and take measures to prevent and deal with risks. The expert also said that the State Bank’s opinion that the public disclosure of classified information is due to sensitivity concerns, so it should be reviewed, measures must be taken to create a transparent mechanism for the operation of the system of credit institutions. This is a field that has a great impact on socio-economic development.

However, according to the State Bank’s explanation, in order to ensure that information about credit institutions is publicly disclosed, the State Bank has asked the credit institutions to disclose financial statements audited by an independent auditing company on the website or the location of the head office or branch of the credit institution and to publish in some newspaper issues nationwide in order to serve individuals and organizations (investors, depositors) who have demand to study the situation of operation and finance of the credit institutions. In addition, every year, the prestigious international rating agencies such as Standard & Poor's, Moody's and Fitch Ratings and other domestic organizations have published their ratings on Vietnamese credit institutions.

In this regard, the economist, Dinh Tuan Minh, said that the number of independent organizations ranked the credit institutions in Vietnam is still limited, the prestigious organizations in the world only assessed some banks in the top which have not covered all system of credit organizations in Vietnam. Hence, the expert suggested that regulators should allow, license and issue-specific legal rules and corridors so that the independent assessment organizations work well in Vietnam to help the people and investors have more information and choices about credit institutions.

By Huong Diu/ Bui Diep