Credit institutions in Vietnam will be classified by using the CAMELS rating system. (Photo baomoi.com)Hanoi (VNA) - TheState Bank of Vietnam (SBV) is planning to rank credit institutions; however,it said the ranking results will not be publicised due to the delicacy of theissue.
According to a draft document theSBV is circulating for opinions, credit institutions to be rated includecommercial banks, financial companies, financial leasing firms, co-operativebanks and branches of foreign banks.
The institutions will beclassified in five groups - A, B, C, D and E - with A representing the bestperforming and E the worst.
The classification will be madebased on quantitative and qualitative criteria.
Qualitative criteria will measurethe health level of the institutions’ operation through statistics on assetsand capital, as well as financial and business reports audited by independentauditors, while quantitative standards will gauge compliance with legalregulations of the institutions.
The criteria or groups ofcriteria will be weighed in accordance with how important they are to theinstitutions’ performance and the supervision requirement.
The criteria are divided into sixgroups - capital adequacy, asset quality, management and earnings, as well asliquidity and sensitivity - called CAMELS rating system – a recognisedinternational rating system.
Responding to a question on whythe ranking results is not publicised, the SBV said on September 18 that unlikethe objectives of international credit rating organisations, these rankingresults will only be used to provide timely warning of risks so that measurescan be taken to prevent the fall of an institution and the whole system, whichwill help protect assets and rights of depositors.
Therefore, the SBV will only sendthe rating result individually to each credit institution, asking theinstitution to timely take solutions to address its shortcomings.
Central banks and financialsupervisory agencies in many countries also do not publicise their rating ofcommercial banks. They just make public periodical rating results ofinternational credit rating organisations, which are a reference for investorsand depositors to make investment decisions, but clearly citing they are notresponsible for the ratings.
Currently, credit institutionsoperating in Vietnam are ranked by international credit rating organisationssuch as Standard & Poor’s, Moody’s and Fitch, based on internationalstandards.-VNA
VNA
