Latest banking industry assessment on Vietnam published

Dhaka,  Monday,   2016-09-17
Published : 17 Sep 2016, 11:42:22

Latest banking industry assessment on Vietnam published

SINGAPORE, Sept. 17--S&P Global Ratings Friday published its "Banking Industry Country Risk Assessment: Vietnam." We classify the banking sector of Vietnam (BB-/Stable/B; axBB+/axB) in group

'9' under its Banking Industry Country Risk Assessment (BICRA) criteria. Other

countries in the group include Argentina, Azerbaijan, Cambodia, Kenya, Nigeria,

 Papua New Guinea, and Tunisia. Our bank criteria use our BICRA economic risk and industry risk scores to

determine a bank's anchor, the starting point in assigning an issuer credit

rating. Our anchor for a commercial bank operating only in Vietnam is 'b+', S & P said.

Economic risks for Vietnam's banking sector are very high by global standards,

as reflected in the country's lower-middle income and emerging institutional

settings that hamper policy responsiveness. The recent rise in credit growth,

if it accentuates, could renew concerns associated with previous periods of

macroeconomic instability and high inflation in Vietnam.

Vietnam's banking system has yet to fully work through legacy stressed assets

(created due to rapid credit growth between 2005 and 2011), the bulk of which

are collateralized by real estate. Banks' credit risks remain extremely high,

in our opinion, reflecting high private sector debt, low income levels, legacy

stressed assets, and rudimentary underwriting standards.

"In our opinion, Vietnam's banking regulations lag international standards,

underscoring industry risks for banks. The banking system has a moderate risk

appetite, overcapacity, and market distortions. A supportive core customer

deposit base and low reliance on external funding temper these weaknesses," the S & P added in a statement.

-rmc//

 
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