Vital indications of banking improve The health of the banking system has improved, with good reports coming in about asset quality, capital adequacy ratio and liquidity, according to the National Financial Supervisory Commission (NFSC). In a recent overview report of the financial markets in 2013 and the forecast for 2014, the NFSC said that the total bank assets in 2013 increased by 15 percent. More importantly, it said, the asset structure had improved, with the share of interbank assets falling from 23 percent in 2011 to 17 percent in 2013. The liquidity of the system also increased with a 23.6 percent growth of capital mobilisation against the 12.5 percent increase of credit. Therefore, the loan to deposit ratio (LDR) fell sharply from 98 percent in 2011 to 85.4 percent in 2013. Another important criterion which shows the banking system's good health is that the capital adequacy ratio is always higher than the minimum prescribed level of 9 percent. In 2013, the capital adequacy ratio reached 12.8 percent. NFSC Deputy Chairman Truong Van Phuoc said that while the credit growth in 2013 was higher than in 2012, the interest rates were lower. Credit in 2013 rose to 12.5 percent against 9.8 percent in 2012. The average lending rates, as calculated by the NFSC, tumbled from 20 percent in 2011 to around 12 percent last year. Besides, the credit structure in terms of currencies was more balanced. The credit in Vietnamese dong rose to 85 percent in 2013 from 81 percent in 2012, while foreign currency credit fell to 15 percent from 19 percent. In the 2011-13 period, short-term credit accounted for about 58 to 59 percent, while medium- and long-term credit accounted for about 41 to 42 percent, showing that there was little change compared with the previous years. Although credit rose fast, its quality also improved, Phuoc said, adding that the figures calculated by NFSC as per the international rules showed that the NPL ratio of approximately 9 percent has sound basis. The NPL ratio of the whole banking system, as reported by the commercial banks, fell sharply from 4.73 per cent at the end of October 2013 to 3.63 percent at the end of 2013. However, according to the State Bank of Vietnam (SBV), with prudent calculation, including all subprime loans restructured under Decision 780, the NPL was about 9 percent. According to NFSC's report, the credit institutions handled 106 trillion VND, or 5.047 billion USD, of NPLs, including about 66 trillion VND, or 3.14 billion USD, by risk provisions and about 44 trillion VND, or 2.09 billion USD, by selling to the Vietnam Asset Management Company (VAMC). Phuoc believed that VAMC and the risk provision made by banks would partly contribute to controlling NPLs. He said this year's challenge was the slow recovery of the economy that would restrict the credit absorbability. However, he expected the existing economic policies, which are designed to boost aggregate demand, to create favourable conditions for credit growth.-VNA