Viet Nam Human Rights
Ensuring monetary security
20/9/17
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The State Bank of Vietnam (SBV)'s draft
circular on ranking credit institutions and branches of foreign banks has
recently attracted a lot of attention from the public. The issue is
considered as quite “sensitive” because thus far the ranking in Vietnam has
been conducted by several international rating agencies and domestic
companies instead of a public agency such as the SBV.
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According to a draft document the SBV is circulating to
collect opinions, credit institutions that will be rated include commercial
banks, financial companies, financial leasing firms, cooperative banks and
branches of foreign banks.
Currently, there are three well-known credit rating agencies,
including Standard & Poor’s, Moody’s Investor Service and Fitch Ratings.
In Vietnam, over recent years, the three rating agencies and a number of
domestic companies and organisations, such as the Vietnam Report Joint Stock
Company, have also participated in the assessment and publication of
information on rating banks to serve the needs of investors and depositors.
Meanwhile, management agencies in many countries around the world also rank
their credit institutions in particular and financial institutions in
general, for the purpose of state management, policy issuance, monitoring of
financial markets and banks, as well as protecting depositors’ rights.
Accordingly, the ratings of credit institutions are used by
management agencies as an early warning in order to prevent the risk of
collapse of each credit institution, as well as the risk of spreading the
whole system, from which timely policy and action will be taken in order to
ensure the safe operation of the banking and financial system, and protect
the assets and interests of depositors.
For various reasons, central banks and financial supervisory
agencies in many countries do not publicise their rating of commercial banks.
They only make public periodical rating results of international credit
rating organisations, which are a reference for investors and depositors to
make investment decisions, but clearly citing they are not responsible for
the ratings.
Like other management agencies around the world, the SBV’s
objective is to evaluate and rank credit institutions and branches of foreign
banks operating in Vietnam, in order to serve the state management within the
banking sector. Therefore, the formulation of the circular includes clear and
transparent provisions on classification methods, criteria for ranking credit
institutions and branches of foreign banks.
Unlike the objectives of international credit rating
organisations, these rankings will only be used to provide timely warning of
risks so that measures can be taken to prevent the fall of an institution and
the whole system, which will help to protect the assets and rights of depositors.
The SBV will only send the rating result individually to each credit
institution, asking that the institution takes timely solutions to address
its shortcomings.
It can be seen that for various reasons, the results of credit
ratings of organisations or management agencies, will be selected to be
publicised or not. But obviously, it is necessary for investors and
depositors to be informed about the “health” of credit institutions and
banks.
The rankings will also help the SBV to give timely warnings,
as well as devise appropriate management measures to ensure monetary
security. Currently, the SBV also requires that credit institutions and
branches of foreign banks publicise their financial statements, audited by an
independent auditing organisation, on their official websites or at the head
offices or branches, in addition to publishing them in a number of newspapers
in order to serve individuals, organisations, investors and depositors that
need to inquire about the performance and financial status of credit
institutions and branches of foreign banks.
In addition, accredited international rating agencies and
domestic organisations will also periodically carry out research and
publications of rating results of credit institutions on the mass media. The
results have become an important reference channel for investors and
depositors.
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