According to Co-opBank’s report, as of May 31, 2020 PCF’s deposits at Co-opBank is 27,099 billion VND, rising by 52.04% whereas PCFs’ borrowings from Co-opBank was reduced tp 3,931 billion VND, falling by 42.88 compared to the end of 2019.
These figures show that Co-opBank is performing well its task of capital regulation within the PCFs system under credit stagnation situation caused by the Covid-19 pandemic. However, these figures show only a part of the whole picture as Co-opBank’s PCF supporting activities are reflected more deeply in monthly reports or by classification of each duty.
For example, since the beginning of this year, Co-opBank has not only helped PCFs in operating more efficiently through capital intermediation but it has directed all branches to execute a number of solutions to support PCFs in interest rate management and maintain a balanced interest rate mechanism to help PCFs reduce costs, increase profitability and keep their customers. Co-opBank’s support has helped PCFs to solve difficulties and has been a foundation for their development in the future.
For safely and efficiently operating PCFs which need to have more supplemented capital, Co-opBank has adjusted its credit expansion limit regulated in capital intermediation regulation. PCFs which have difficulties in paying customers’ deposits have also been lent by Co-opBank and resumed their normal operations.
Since the start of 2019 till now, Co-opBank has amended, promulgated and implemented policies on lending to PCFs to be relevant to PCFs’ situation and development requirements such as: Capital intermediation regulation, Off-site monitoring, lending and loan use procedures for PCFs…
Co-opBank’s apex role has also been reflected in PCFs monitoring through PCFs’ reports and internal credit ratings. Co-opBank has issued warnings of PCFs’ weaknesses that need to be identified and solved. In 2019 alone, Co-opBank carried out comprehensive inspection for 10 PCFs in 10 different provinces and cities under the State Bank’s instruction. Also, Co-opBank has co-ordinated with the State Bank branches in supporting weak PCFs in the country. Currently, Co-opBank has assigned 23 staff who is managers and deputy managers to work ó-site at those PCFs. Their salaries, accomodation and travel expenses are all paid by Co-opBank.
Promoting its role as the system central bank
The role of a leading bank in the system is shown increasingly clear through the development of banking products and services for PCFs. In addition to lending directly to customers, Co-opBank also actively lend to PCFs’ members through affiliated and syndicated loans. Total outstanding loans to businesses and individuals as of December 31, 2019 was 17,666 billion VND, increasing by 7.42% compared to 2018; in which outstanding loans to agriculture and rural areas accounted for 72.27%.
As the focal point to develop and provide\new products and services for PCFs, Co-opBank has concentrated human, financial and techonological resources to continue implementing CF-eBank system. Particularly in 2019, Co-opBank organized 2 CF-eBank training courses for 53 PCFs, admitted 29 PCFs to the electronic money transfer payment network, bringing the transaction network to over 615 points, including 32 branches, 64 transaction offices and 519 PCFs participating in payment system.
Data on the CF-eBank internal payment system in 2019 shows that outgoing remittance transactions are 935,030 with a total of 239,557 billion VND. Incoming remittance transactions reached 668,535 with a total of 225,869 billion VND, of which PCFs’ outgoing remittance in the year reached 309,295, with 17,460 billion VND and 42,872 incoming remittance transactions, with 3,286 billion VND.
Along with interbank electronic payment channels (CITAD) and multilateral payments, Co-opBank has served the diverse needs of PCFs and its customers to make payments between CF-eBank and other banks outside the system. Outgoing transactions reached 369,448 with a total amount of 96,506 billion VND; and 165,613 incoming transactions with 95,512 billion VND.
According to Co-opBank’s leaders, in order to expand and complete implementation of the CF-eBank e-banking project for PCFs, Co-opBank puts aside a large amount of capital of about 400 billion VND on the current account at the State Bank with insignificant interest rate to serve PCFs’ money transfer payment needs.
In 2019, Co-opBank granted overdraft facilities to 334 PCFs with a total of 373.6 billion VND. Total overdraft used by PCFs 3,914 billion VND. The granted overdraft limit has met the capital needs of PCFs’ money transfers. In 2020, Co-opBank has granted an overdraft limit to 347 PCFs participating in payment network with a total limit of 442.8 billion VND.
Co-opBank’s 19 branches have implemented overdraft limit products for 439 employees of 62 PCFs. Payment cards were issued to 171 PCFs with 4,622 staff and members.
Currently, Co-opBank continues to implement 9 international credit projects with the remaining outstanding balance with donors as of December 31, 2019 of a total 1,051 billion VND. Technical assistance project “Strengthening PCFs system” (STEP) entered the third year of implementation and completed the pilot of 2 credit products and 01 internal audit toolkit. The management information system (PRMS) has been implemented since July 2019 with the goal of building a reporting information system for PCFs management. It is being tested and trained for Co-opBank’s staff.
However, there are obstacles that Co-opBank has encountered as some supporting mechanisms are still missing such as a mechanism to handle loans for weak and non-recoverable PCFs. Currently, Co-opBank’s branches cover only 30/57 provinces and cities that PCFs are present, therefore Co-opBank face many difficulties in capital regulation and direct support for PCFs. Co-opBank’s limited financial capacity has had a significant impact on its ability to meet the capital needs to serve PCFs.
In order to support PCFs to develop safely and sustainably and create favorable conditions for Co-opBank to implement restructuring solutions, starting from the general situation of the system, Co-opBank proposes to the State Bank to continue studying, reviewing, editing and issuing a management mechanism suitable to PCFs’ operation characteristics to ensure the safe and efficient development for Co-opBank and PCFs; research and revise regulations on ratings of banks on the basis that Co-opBank does not pursuit profits but focus on supporting the operation of the PCFs system (in terms of capital, human resources, technology, operations, and information technology…). At the same time, Co-opBank should be provided additional charter capital to strengthen the financial capacity to better perform the role of the focal bank of the PCFa system.
The Banking Times
