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Circular 36 will improve Vietnamese bank governance

Thursday, March 12, 2015

Subject

The outlook for Vietnam's Circular 36 bank initiaitve.

Significance

Vietnam's banking sector remains fragile after the recent global economic downturn and because of excessive leverage by state-owned enterprises (SOEs) looking to finance acquisition sprees using debt. However, 2015 will be a key year: the State Bank of Vietnam (SBV) enacted 'Circular 36' on February 1, to improve the governance structures and operating requirements of Vietnamese commercial banking.

Impacts

  • Banking sector improvements should help the expanding commercial business sector through more vigorous lending.
  • If Hanoi sticks to its reform agenda, banking sector systemic risk will decrease, with further rating upgrades likely for Vietnam.
  • A stronger banking sector should underpin Vietnamese socio-economic development.
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