Over 25 formation and development (1995 – 2020), the forerunner of Co-opBank, PCF in the region and now the Cooperative Bank of Vietnam has become the foundation for the stability and development of the PCFs system in the country. The support that Co-opBank has provided not only helps PCFs step by step affirm the position as a new type of economic cooperative in the financial sector, but rather, the development of the PCFs system over almost 30 years proves the rightfulness of assigning network integration to Co-opBank. Deputy Governor of the State Bank of Vietnam-Mr. Dao Minh Tu shared with reporters of The Banking Times.
Can you explain in more details Co-opBank’s role in the development of PCFs?
It can be said that Co-opbank’s development is a process of transition and maturation, step by step in response to the development requirements of the PCFs system and the cooperative credit institutions. From the 3-level PCFs model in the early years to the transition to a 2-tier system in 2000 and reformed again in 2013 from CCF becoming Co-opBank. Along with that is a clearer transition to a cooperative model, operating in financial services, implemented simultaneously under the Law on Credit Institutions and the Law on Cooperatives; To promote the leading role of the State in Co-opBank’s organization and operation to both perform monetary and credit business tasks; also acts as a focal point intergrate and ensure the safety of the PCFs system.
Looking back over the past 25 years, Co-opBank has fulfilled its core task of supporting PCFs through regulating capital when needed. It has seeked and implemented international funding projects to provide practical products for PCFs members, including the application and investment in a core banking system, adding electronic money transfer, internal payment to diversify operations and improve brand reputation for the PCFs system.
Co-opBank has not only regulated capital and managed the Safety Fund, it has also been the focal point to provide timely support to PCFs which face extreme difficulties by giving liquidity support and special loans; sending its staff to participate in the management, administration and control to handle the unstable difficulties of PCFs falling into special difficulties, ensuring the safety of operations for each and all PCFs.
Co-opBak plays a good role supporting the State Bank’s supervisory and state management function of PCFs through participating in the inspection and supervision PCFs which borrow at Co-opBank. It acts as the focal point in printing and issuing of savings books template, which is considered as practical and necessary, contributing to improving the safety of PCsF system operations.
In addition, Co-opBank undertakes the mobilization function to provide loans to non-PCF customers according to regulations, building a reasonable interest rate mechanism to both support PCFs and generate profits to ensure efficient funding for its own operation, and at the same time providing financial support to Vietnam Association of People’s Credit Fund (VAPCF).
Co-opBank’s support has helped has helped to develop nearly 1,200 PCFs, more than 1.6 million members (representing more than 1.6 million households) operating in 57/63 provinces and cities with a total capital of more than 120 trillion Dong (equivalent to 5.2 billion USD), promoting production and business of farmers, contributing to the achievement of poverty alleviation and usury reduction in rural areas.
In the context of extensive integration and development requirements of PCFs’ system, what is State Bank’s orientation for Co-opBank’s development in the future to meet the mission role assigned by the Party, the Government and the State Bank to be “the Bank of all PCFs”?
This is an issue that the Government and the State Bank of Vietnam are very interested in and have clearly stated in the strategic direction, the Banking Sector Development Plan especially in the Plan for strengthening and development of PCFs till 2020 with direction to 2030. The most important goal is to build co-operative credit institutions with integration between Co-opBank and PCFs and the entire network becomes a unified, safe, healthy and effective operation.
In order to do that, first of all, it is necessary to allow Co-opBank to play the role of integrating and supporting the system and acting as a focal organization through clearly defined policy mechanisms. The development of regulations on lending, mobilizing and providing products and services both ensures the reasonableness, while ensuring the harmony of interests between Co-opBank and PCFs and at the same time helping to solve the difficulties of PCFs. Especially in the coming period, Co-opBank should be equipped with more functions, duties, financial and human resources to work with the State Bank of Vietnam to implement the Plan of strengthening the PCFs system.
Secondly, Co-opBank needs to be given sufficient financial resources, increasing the charter capital from the capital contributed by the State; support capital from the Vietnam Co-operatives Alliance. Along with that are policies and strategies to attract funding sources from domestic and foreign enterprises, units, and economic organizations and the contribution from the PCFs themselves as members; Co-opBank needs to be able to have a reasonable interest rate mechanism to mobilize resources in the society to address the supporting needs from PCFs.
Thirdly, Co-opBank should be allowed to manage the Safety Fund in the best possible way. To do so, it is necessary to build a clear and transparent mechanism for Co-opBank to both act as a managing and regulating organization of the Safety Fund through members’ fee payment mechanism. The Safety Fund should be used for the right purpose, in a timely, efficient and fair manner with high consent from PCFs, promoting its role in solving difficulties for PCFs when losing liquidity control.
Fourthly, the organizational structure model should be continued to design and complete. In particular, branches distribution should be reviewed and re-organized in order to be able to take on the role of supporting the system quickly, removing limitation arising from geographical factors. At the same time, allowing Co-opBank to participate in the inspection and supervision of PCFs’ activities so that Co-opBank can become a supporting tool for the State Bank’s management function of the PCFs system.
Fourth, continue to build and complete the organizational structure model. In particular, consider balancing and supplementing areas that lack branches in order to be able to take on the role of supporting the system quickly, without sand, and limited by geographical factors. At the same time, increasing conditions for the central bank to participate in the inspection and supervision of PCFs’ activities so that Co-opBank can be supportive to the State Bank’s management function of the PCF system.
In addition, Co-opbank should have more policies and products to increase the capacityr to support and provide more benefits for PCFs.
Another matter to be considered is building a strong and skilled workforce capable of performing well the tasks of both credit trading and acting as the focal point of the PCFs system.
Looking at the current development of the PCFs system and the strong transformation of the banking system in the context of a deeply integrated economy and the 4.0 technology revolution, what is State Bank of Vietnam’s point of view and orientation for the development of PCFs system including Co-opBank in the coming time?
Currently, the State Bank is focusing on consolidation and reorganization to ensure the PCFs system operates in a safe and healthy manner, avoiding failure and difficult situations similarly to some PCFs recently. That requires reviewing the regulations and a legal framework that both create the openness and ensure the principles and nature of the co-operative credit model. PCFs must not be turned into profit-seeking banks.
To accomplish this goal, the State Bank has been focusing on directing the implementation of the Project on strengthening the development of PCFs system; issued many legal documents, implemented the instructions of the Government and the State Bank to reorganize the system; strengthen inspection and supervision, detect errors and handle violations drastically, creating a stable system, ensuring the depositors’ rights. In particular, Co-opBank is also enhanced its role in inspecting, controlling and supervising the activities of the PCFs system, helping the State Bank to perform well the state management function. Currently, the State Bank is building strong sufficient mechanism to handle violating PCFs and gradually renovating the management mechanism of PCFs according to the size and quality of assets to suit the current requirements; strengthening the State management of the State Bank and local authorities at all levels.
The State Bank is to amend the Law on Deposit Insurance, making deposit insurance a practical tool to help stabilize the PCFs system, ensuring the safety of deposit balances and restoring trust for depositors. In the short term, it is being proposed to the Prime Minister to increase deposit insurance from VND 75 million to VND 125 million.
Following the period of consolidation and re-organization, the State Bank will continue to study, adjust and complete the PCFs model in accordance with the actual and future requirements in the context rapid banking growrh, IT and science development and economic integration. From there, a mechanism to manage and operate the PCF ssystem will be designed, it is certain that this improved PCFs model must meet practical requirements and able to solve the problems that a nearly 30-year-old management mechanism might have.
However, regardless of how much improvement will be made and based on international experience and practices, we still highly value the role Co-opBank and PCFs, affirming its inevitable existence and its role in providing capital for production and businesses, serving the collective economy, households and preventing usury especially in rural and remote areas. In particular, we expect that in the future, Co-opBank will become the central bank of PCFs, which can really provide even more support, benefits, products and services for PCFs so that PCFs will be more voluntary and more committed in joining this integrated network.
Thank you very much Deputy Governor!
Minh Ngọc/Banking Times
