- June 29, 2020
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Vietcombank’s Nghiem: "COVID-19’s economic impact to linger"
In this new piece for the CEO Perspectives series, Vietcombank Chairman Nghiem Xuan Thanh discusses how COVID-19 played out in Vietnam, the bank’s readiness and response to the crisis, as well as what could come out of the pandemic for the industry at large.
- COVID-19 has increased many costs for banks while making the business landscape more difficult to navigate
- Vietcombank actively engaged in social welfare campaigns and offered support packages to aid those affected by the pandemic
- It will take time before socioeconomic activities go back to normal levels
COVID-19 is not only a health crisis, but also a socioeconomic concern. Social costs have increased, production has been suspended and global supply chains have been disrupted. Economies will experience shocks from both the supply and demand sides. It’s reasonable to say that the pandemic will continue to affect not just people’s lives, but also economies and societies at large.
Governments around the world have introduced programmes to help ease economic pressure, as well as support businesses and people. Yet, I think it will take quite some time before socioeconomic activities return to normal.
Coronavirus and the banking sector
The COVID-19 pandemic has hit the banking sector both directly and indirectly.
Businesses face difficulties, with some even declaring bankruptcy or closing completely. This has caused credit demand to decline and, expectedly, increased non-performing loans, thus, creating significant credit cost. In order to support customers, banks have provided interest exemption and reduction, fee waiver, loan restructuring and other measures, although these will also negatively affect the banks’ performance.
Banks have also incurred additional costs in ensuring the health and safety of their employees and customers. The implementation of business continuity plans also come at a price, be it from adjusting work hours on alternating schedules, to supporting a work-from-home setup. These actions have driven up the banks’ costs and affected their performance.
There’s also a shift towards digital, with more customers switching to online transactions. To respond to that, banks now must take serious actions to control cyber risks and prevent frauds.
Ensuring safety and readiness during a critical time
When Vietnam first recorded a COVID-19 case, we promptly prepared a business continuity plan (BCP) with different levels and communicated it properly within our network. We monitored the developments of the pandemic closely and activated each BCP level accordingly so that we are fully prepared in all circumstances.
We issued warnings to our customers and employees and strictly followed health and safety regulations at work as well as in providing services to customers. We’ve also kept our customers well-informed of the developments and the bank’s actions in a timely manner.
When the coronavirus situation in Vietnam became more complicated, we organised our teams to allow them to work from home. We ensured that essential banking services to customers remained accessible while strictly following health and safety measures for our employees and customers that have direct contact.
Vietcombank also came to the aid of customers experiencing difficulties through multiple support packages. Examples of these are exemptions and reductions of interests and fees, as well as loan rescheduling. We also actively engaged in social welfare campaigns and joined the whole country in our common fight against the virus.
Lasting impacts of the pandemic
With the combined efforts of the Vietnam government and its people, the COVID-19 outbreak has been contained in Vietnam. And I think that, with all the efforts of other countries, it will soon be contained worldwide. However, its implications and impacts on the economy will linger.
It will take time for the global supply chains to get back to full operations. It will take even longer for the tourism, aviation and hospitality industries to see recovery and grow again. It will also take significant time for the global economy to return to its growth rate before the pandemic.
However, from a different perspective, we can see a few good things coming out of the pandemic. There have been changes in mindsets about modes and methods of working, for one. There’s also increased resiliency and flexibility of businesses, as well as of individuals. The development of new technological infrastructure and protocols is also welcome. I hope that after the pandemic is over, each individual and business – banks included – will be better prepared for risks that may arise in the future.
Nghiem Xuan Thanh is the chairman of Vietcombank, one of the largest state-run banks in Vietnam.