(The following was released by the rating agency)
SINGAPORE (Standard & Poor's) Aug. 29, 2012--Standard &
Poor's Ratings Services said today that a recent arrest of one
of the founders of Asia Commercial Bank (ACB; not rated), one of
Vietnam's largest privately owned banks, highlights the risks in
the country's banking industry. Standard & Poor's understands
that the resultant liquidity pressure was limited to ACB, and
believes that it is unlikely that other Vietnamese bank will
face a similar situation.
We believe that assurances by State Bank of Vietnam of
liquidity assistance to ACB could mitigate the risk of
contagion. Nevertheless, if other banks in Vietnam face
liquidity pressure that leads to a systemic or a confidence
crisis, our ratings on these banks may come under downward
pressure.
We have always perceived inadequate governance and
transparency as key risks for Vietnam's banking industry (see
"BICRA On Vietnam Revised To Group '10' From Group '9',"
published Nov. 9, 2011, on RatingsDirect on the Global Credit
Portal). In our view, timely reforms of the country's
state-owned enterprises and its banking sector are essential to
build depositor and investor confidence in the system,
especially when nonperforming loans are rising.
After several years of high credit growth, economic
imbalances have reduced somewhat following the government's
stabilization policies in 2011. A much-needed moderation in loan
growth, a restoration of asset price stability, and a reduction
in inflation have taken place as a result of these policies.
Policymakers have recently started showing intent to tackle
long-standing problems in the banking sector. The indications
include initiatives to consolidate and strengthen the industry,
greater recognition of asset quality problems, and enhanced
supervision. The government eased monetary policy earlier this
year in response to receding inflation, the stress faced by
borrowers due to heightened interest rates, and a slowdown in
growth.
The process of restoring confidence in the banking system
and monetary policy is in an early phase and calls for careful
management.
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