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Deputy governor of state bank visits Co-opbank

Mr. Nguyen Phuoc Thanh- the Deputy Governor of the State Bank of Vietnam (SBV) visits the Co-operative Bank of Vietnam (Co-opBank) on Novermber 17th, 2014.

Mr. Nguyen Phuoc Thanh- the Deputy Governor of the State Bank of Vietnam (SBV) visits Co-opBank

Participants in the meeting also included Mr. Nguyen Huu Nghia- Chief Supervisor of the SBV, Mr. Pham Huyen Anh- Director of the Policy for safe banking operations Department- Banking Supervision Agency, Mr. Tran Quang Khanh- Chairman of Co-opBank, Mr. Do Manh Hung- General Director of Co-opBank, Deputy General Directors, Board’s members and the Supervisory Board.

Mr. Do Manh Hung- General Director of Co-opBank reported to the Deputy Governor current operation ò Co-opBank and PCFs at the meeting. By strictly complying with the Government and the SBV’s policies and solutions and under the direction of the Directors Board, Co-opBank’s employees have made major efforts to gain substantial achievements despite economic dificulties. As of 30th September 2014, total operational capital was 19,871.9 billion VND and total outstanding loans was 12,992.7 billion VND. Besides, Co-opBank has also focused on capital intermediation, liquidity and solvency support provision ensuring prompt, active and flexible solutions to problems.

In addition, a number of legal documents have been established for Co-opBank’s responsibilities and obligations towards the PCF system to be implemented, namely: Regulations on capital intermediation, Co-opBank’s opinions on PCF’s appointments for key positions, Guidelines on reporting between PCFs and Co-opBank, Regulations on management and implementation of the Safety Fund. Those documents have been approved by PCFs members in Co-opBank’s Members General Meeting in 2013. 21 training classes on those legal documents have been carried out for nearly 1,200 PCFs nationwide.

Especially, “Co-opBank & PCFs’ re-transformation scheme for 2013-2015 period, with a vision to 2020” and “Plan for Co-opBank’s re-transformation to 2015” have also been established.

Co-opBank has continued to implement CF-ebank for PCFs in the system in order to provide money transfer services for PCFs’ members and local residents in rural area through Co-opBank’s e-payment system. In the future, members’ cards which are also domestic credit cards will be implemented in the entire system, and more training activities will be conducted for both PCFs’ management and staff to strengthen their professional skills.

Co-opBank’s operation has encountered a number of difficulties, such as: some mechanisms of the system have not been fully clarified in the Law on Credit Institutions, legal relations between Co-opBank and PCFs and their coordination have been limited; some PCFs have not been fully aware, understood or complied with the Circular No. 31/2012/TT-NHNN on “Regulations on Co-opBank” and Circular No. 03/2014/TT-NHNN on “Regulations on PCF system’s Safety fund”.

Besides, providing supported loans for savings payment to PCFs where staff have violated regulations and caused capital losses encounters some difficulties as there has not been any mechanism by the SBV for risk management of this kind of loans. Another example is the current Law of Deposit Insurance which regulates that any credit institution (including PCFs) can only claim the insurance when they have become bankrupt. This does not help to provide support for the safe operation of PCFs which have liquidity and insolvency problems.

Another difficulty includes Co-opBank’s charter capital which has not been sufficient according to the State’s regulation (reaching 2,153 billion VND when 3,000 billion VND is needed), therefore Co-opBank’s scale of operation is relatively small compared to other States- owned commercial banks. Its limited capacity somewhat affects its performance as the apex of the whole system.

Also at the meeting, an update on the current operation of the PCFs system was provided to Mr. Nguyen Phuoc Thanh. As of 30th September 2014, there are 1,146 PCFs operating in 56/60 cities/provinces, with 1.8 million members. Total capital is 64,693.8 billion VND. Loans from Co-opBank are 3,694.4 billion VND. Loans outstanding are 49,150.9 billion VND.

However, recently their operations have shown some negativities, such as: not staying close to the cooperative principles with the purpose of providing support to members; some PCFs do not fully comply with the laws on the safe operation of PCFs, causing risks for those PCFs themselves and adverse impacts on local PCFs. The management and supervision of some PCFs still lack of professionalism. The role of the Supervisory Board has not been fully promoted. PCFs’ lending to their members still lacks of non-financial support and has not shown any differences from other commercial banks’ lending.

A more serious issue is there have been increasing cases of moral hazard and regulations violation which cause financial and safety losses; Some individuals bring their own funds to the communes (through their relatives) to establish PCFs; Most PCFs have to pay only 50,000 VND to 100,000 VND for membership fee therefore they do not have the motive in contributing to the management and supervision of PCFs.

Speaking at the meeting, Mr. Nguyen Phuoc Thanh spoke highly of Co-opBank’s achievements and its role in the PCFs system. Co-opBank has performed well in capital intermediation through their PCFs members for agricultural and rural development. Mr. Thanh stressed that Co-opBank needs to make more effort in managing weak PCFs and soon the SBV’s Circular on organization and operation of PCFs will be promulgated, which will create a close alignment in the operation and supervision between Co-opBank and PCFs, ensuring safety- efficiency and sustainability. From now until the end of the year, Co-opBank needs to do that even better to help farmers in agricultural and production development.

Some images from Mr. Nguyen Phuoc Thanh’s visit to Co-opBank:

Mr. Thanh visits departments at Co-opBank’s Headquarter. 

Mr. Do Manh Hung- The General Director of Co-opBank reports to Mr. Nguyen Phuoc Thanh on the operation of Co-opBank and PCFs. 

Mr. Nguyen Phuoc Thanh- the Deputy Governor of the SBV discusses with Mr. Tran Quang Khanh- Chairman of Co-opBank and Mr. Do Manh Hung- General Director of Co-opBank.