How should weak banks be restructured? While the State Bank (SBV) has legalized the use of state money to support the restructuring of weak banks, it has not specified where the government will get the money to pump into the banks.   SBV is consulting with ministries and agencies on a draft law to support the reshuffling of credit institutions and settling bad debts. Phan Minh Ngoc, an economist, in an article published in a local newspaper, said that the provisions in the draft laws have legalized the use of the state budget for settling bad debts. Article No 31 of the draft law says that weak banks taken over compulsorily may receive refinancing from the government to increase their charter capital, or may receive preferential loans at the interest rate of zero percent. Nguyen Tri Hieu, a finance and banking expert, emphasized that after being taken over by SBV at zero dong, the banks must have their charter capital supplemented.  Article No 31 of the draft law says that weak banks taken over compulsorily may receive refinancing from the government to increase their charter capital, or may receive preferential loans at the interest rate of zero percent. In the case of the three banks which SBV bought at zero dong (Ocean Bank, CB Bank and GP Bank), their stockholder equity might have become ‘minus’’. Meanwhile, under the Law on Credit Institutions, one bank must have charter capital of VND3 trillion at minimum. So if the banks have ‘minus’ chartered capital, SBV, as the holding company and the only investor, will have to pour more capital into the banks to ensure the minimum charter capital. However, Hieu commented, no one knows how much capital the three banks have. SBV assigned VietinBank and Vietcombank – the two commercial banks in which the state holds controlling stakes – to support the operation of three zero dong banks. However, VietinBank and Vietcombank can only help the three zero-dong banks by lending money, which the zero-dong banks use to pay to depositors or to relend to others. Hieu believes that it would be better to skip the purchase of weak banks at zero dong. After putting weak banks under special control, SBV’s inspectors will find out if the banks can recover. If ‘yes’, SBV will go directly to the final step – forcing the weak banks  to merge with other banks, or selling the weak banks to investors. If no one wants to take over the weak banks, they must go bankrupt. The central bank purchased weak banks two years ago at zero dong, avoiding a possible collapse of the banking system. However, Hieu doesn’t think the measure should be applied in the future.   Kim Chi, VNN