Financial security in Viet Nam in conditions of international integration

31Nghiên cứu trao đổi ● Research-Exchange of opinion FINANCIAL SECURITY IN VIETNAM IN CONDITIONS OF INTERNATIONAL INTEGRATION Bui Thanh Nga* Date received the article: 2/3/2019 Date received the review results: 01/9/2020 Date published the article: 28/9/2020 Abstract: Financial security is increasingly a vital issue for each country and globally in the trend of free trade, free fl ow of capital. The development of the fi nancial market over the years has actively contributed to promoting economic growth and stabilizing the macro- economy. However, Vietnam has a small fi nancial and economic system that makes it vulnerable to the impacts of the world’s fi nancial and economic crisis and internal economic diffi culties. The paper focuses on researching fi nancial security in Vietnam and gives recommendations to keep fi nancial markets stable in the process of international integration. Keywords: Financial security; International integration; impacts, Vietnam. * Institute of Economics and Management - Hanoi University of Science and Technology 1. Overview of fi nancial security Under the infl uence of globalization and fi nancial liberalization, countries are facing increasing fi nancial risks and fi nancial crisis has become a major threat to the world economic security. Therefore, enhance fi nancial security, improve and reform the fi nancial supervision institutions, establish the necessary response mechanisms, fl exible risk- prevention mechanisms, and strengthen coordination and cooperation with international community in the fi nancial sector, has become the main content of fi nancial security. The fi nancial market includes many types of markets in which it is especially important to ensure the operation of the money market and banking, the stock market and the insurance market to be stable, safe and developed. It has the ability to prevent crises and will provide the main foundation for fi nancial security for fi nancial markets. It has the ability to prevent crises and will provide the main foundation for fi nancial security for fi nancial markets. The money market and the bank, the stock market, the insurance market have a close relationship with each other. Ensuring fi nancial security for one market will positively impact the security of another market and vice versa. Failure to ensure fi nancial security for one market will cause negative impacts on other markets and negatively aff ect the performance of both fi nancial Tạp chí Khoa học - Trường Đại học Mở Hà Nội 71 (9/2020) 31-35 32 Nghiên cứu trao đổi ● Research-Exchange of opinion markets in national relationships and in some cases. can negatively aff ect the fi nancial markets of both the region and the world. Criteria to ensure fi nancial security for the monetary and banking markets includes: Minimum capital safety criteria for the organization and the whole system, and credit limit indicators; solvency ratio; limit on capital contribution to buy shares; rate of credit extension in total mobilized capital; the maximum limit on the percentage of overdue debts; rate of profi t earned; the indicators to assess the tolerance level of each organization participating in the market and the whole system to avoid the impacts of crises. Below are some common types of fi nancial crisis: Banking Crisis; National Debt Crisis; Monetary Crisis; Crisis of Security market; Crisis of Balance of payment; Crisis of current Account; Crisis of capital Account; Crisis of Liquidity; Crisis of Government Budget. The four factors that ensure fi nancial security for the fi nancial market are stability, safety, development and resilience to the impact of crises. The component market that makes up the fi nancial market is also guaranteed by four general determinants as the fi nancial market. These are the stability, safety, development and crisis resistance of the money and banking markets, the stock market, and the insurance market. In addition, the factors that strongly aff ect the fi nancial markets are the eff ect of public debt in such a way that meets the anti- money laundering standards of countries and fi nancial institutions. 2. Assess the current fi nancial security situation in Vietnam in international integration Vietnam has formed a banking system from a subsidized banking system, in which the State Bank plays the role of the Central Bank, the Bank of the Government and the system of credit institutions includes: commercial banks, development banks, cooperative banks, non-bank fi nancial institutions, foreign banks, foreign bank branches in Vietnam and more than 1,100 people’s credit funds. These are particularly important prerequisites in the development of the money market and banks in Vietnam. The current scale of the banking and money market is quite large for the entire economy, so it is important to ensure fi nancial security for the money market and banking operations in Vietnam, that means to ensure the stability, safety and development for the vital market to stabilize and develop the economy. The nature of the problem of bad debts in the banking industry is a particularly important topic and task that the Government, the branches of all levels must handle. If it is not well handled, it will cause very bad consequences for the economy, threatening the security of the fi nancial markets. According to the report of the credit institution, the bad debt recorded on the balance sheet by April 2013 was 136 trillion VND, accounting for 4.7% of the total outstanding credit. As of the end of December 2012, the outstanding loans of the State Bank to credit institutions was about 130 trillion VND. 33Nghiên cứu trao đổi ● Research-Exchange of opinion Over the past years, the monetary and banking markets of Vietnam have not had high stability due to the adverse eff ects of the global macro economy and the internal Vietnamese economy. If taking into account the suffi cient factors to ensure fi nancial security for the money market and banks in Vietnam over the years as stability, safety, development and resisting external crises or from within the economy, these factors are fragile and unstable. Infl ation in 2011 increased highly (18.6%), to 2012, it suddenly dropped to (6.81%). Thus, in order to promptly solve the fi nancial insecurity of the current fi nancial market in Vietnam, it is to fi nd out the main cause of bad debt, draw out lessons from this practice and fi nd well- handled solutions to avoid a heavy crisis for the money and banking markets, a particularly important component of the fi nancial market. + Group of causes from the domestic and international economic environment: unstable macroeconomic, domestic and international conditions as economic stimulus, infl ation control, global economic crisis, especially in European region which is fl ooded with public debt crisis. Huge outstanding debt in capital construction leads to many unfi nished, long-term works, low investment effi ciency, total outstanding capital construction debt up to now is about 100 trillion VND; production, trading and consumption of goods have been diffi cult, and inventories have increased; the stock market, the real estate market plummeted and prolonged stagnation ... + Group of causes from the credit institutions: the governance capacity of credit institutions still exists many shortcomings compared to the scale and credit growth rate and the level of risks, the violation of legal regulations on credit extension and safety of banking operations have led to an increase in bad debt in many credit institutions, weak capacity, professional qualifi cations and ethics of some bank offi cers, even at the highest leader. + Group of causes from customers: borrowers from credit institutions have an unhealthy fi nancial situation, business losses, use loans for wrong purposes, ineff ective investment plans; enterprises, especially state-owned enterprises, still have many limitations in competitiveness, low business effi ciency, slow consolidation, innovation, weak fi nancial capacity, small equity, mainly relying on loans from banks, so the ability to cope with changes in business environment is weak. + Group of causes from mechanisms and policies: for many years, macroeconomic policies, including monetary policy, still have many inconsistencies and instability due to the pursuit of economic growth and infl ation, macroeconomic stability, the institutional framework of the State Bank, especially management policies, safety regulations on investment and inadequate credit activities, the establishment of bad debt classifi cation was not synchronous and not drastically directed, the legal system still has shortcomings, especially in the areas of planning, land management, bankruptcy, business dissolution, the mechanism of recovery production and 34 Nghiên cứu trao đổi ● Research-Exchange of opinion development strategies of ministries, branches and localities are still inadequate. + Group of causes from inspection and supervision: the eff ectiveness of inspection and supervision is still limited from the inspection system of the Banking Inspection and Supervision Agency as well as the inspection and supervision of branches in provinces and cities. Inspection, supervision and management of ministries are also inadequate. Thus, it can be affi rmed that the current Vietnamese banking and currency market has been facing many diffi culties, fi nancial security is not guaranteed, all factors of fi nancial security are: stability, Safety and strength as being able to withstand a crisis are in danger of being broken. Group of causes from inspection and supervision: the eff ectiveness of inspection and supervision is still limited from the inspection system of the Banking Inspection and Supervision Agency and the inspection and supervision of branches in provinces and cities. Inspection, supervision and management of ministries are also inadequate. Thus, it can be affi rmed that the current Vietnamese banking and currency market is facing many diffi culties, fi nancial security is not guaranteed, all elements of fi nancial security such as stability, safety, and strength in dealing with crisis are in danger of being broken. The monetary and banking markets in Vietnam are not operating at a stable level, with low safety and diffi cult development which are likely to fall into crisis due to rising overdue debts of commercial banks. 3. Some recommendations to ensure fi nancial security in Vietnam In Decision No. 450 / QD-TTg of 2012 on the approval of a fi nancial strategy to 2020, with the overall objectives are: “Building a healthy national fi nancial system, ensuring fi nancial security, stabilizing the macro-economy, fi nance and monetary, creating conditions to promote economic growth associated with growth model innovation and economic restructuring, well solve social security problems; mobilizing, managing, distributing and using fi nancial resources in the society in an eff ective, equitable, synchronous and comprehensive manner to ensure the eff ectiveness and effi ciency of fi nancial management and supervision. The specifi c solutions to ensure the security of Vietnam’s fi nancial market are to ensure fi nancial security for the money and banking markets, the stock market and the insurance market, and strengthen national debt safety, fi nd out solutions to improve the eff ectiveness of money laundering prevention and combat to ensure fi nancial security of Vietnam in terms of international economic integration. In order to avoid hurting the economy, making the fi nancial and banking system more and more effi cient, reducing risks, and operating safely and eff ectively, the fi nancial market needs to build solutions and measures to ensure fi nancial security for fi nancial market operations. They are: + Some solutions to ensure security for the money market and banks in Vietnam are as follows: building and issuing a stable 35Nghiên cứu trao đổi ● Research-Exchange of opinion monetary policy; formulating and enforcing safety policies in the operations of credit institutions; improving the eff ectiveness of the inspection and supervision of credit institutions; to strengthen risk management in credit institutions’ operations; handling irregular problems in the operations of credit institutions; bad debt settlement ensures that by 2015, bad debts of the whole Vietnamese credit institutions will be below 5%, preventing and combating crimes in credit institutions; to build link solutions; building and implementing to improve the stability and safety of the interbank market, the market between the credit institution and the central bank; managing and monitoring the portfolios of credit institutions. + Strengthen fi nancial security solutions for the stock market such as: building and implementing macro policies to stabilize and develop; formulating, promulgating and supervising the implementation of the laws on securities and Vietnam’s securities market; solutions for stability and development, subjects participating in the stock market; major solutions to developing stock market surveillance system; transparent solutions to control information related to stock market; solutions to increase quality goods for the stock market ... + Strengthen solutions to ensure fi nancial security for the public debt market of the Government such as: enhancing effi ciency of public investment; increasing control over public debt growth; revenue improvement; increasing foreign exchange reserves to increase debt repayment capacity of the economy; developing debt repayment plan; publicity and transparency to control public debt. + Improve the eff ectiveness of money laundering prevention and combat activities in the context of increasingly deep integration into the world economy, that is: perfecting legal basis to meet domestic and national requirements. sacrifi ce; perfecting and improving the operational effi ciency of organizations mainly implementing the function of money laundering prevention and combat; strengthening domestic cooperation among ministries, branches and related agencies on money laundering prevention and combat; strengthening international cooperation on prevention of money laundering, prevention of global crime. Synchronous solutions on fi nancial security for Vietnam’s fi nancial market should be implemented to meet both quality and quantity, ensure the interconnection of diff erent types of markets, and create unifi ed activities in fi nancial market. References: [1]. Prime Minister of the Republic of Vietnam (2012), Approving Vietnam’s fi nancial development strategy to 2020, Decision 450 / QD-TTg in 2012 [2]. Tô Ngọc Hưng (2011), Vietnam Financial Monitoring System, Finance Publishing House. [3]. Citi Groups, 05 November 2012, Discussion materials banking system reform [4]. Nouriel Roubini (2008), Ten Fundamental issues in reforming fi nancial Regulation and supervision in a world of fi nancial and globalization, fi nancial stability Forum on march 31,2008. Author address: Institute of Economics and Management - Hanoi University of Science and Technology Email: nga.buithanh@hust.edu.vn