Banks are prohibited from increasing salaries and bonuses if they have not made provisions to handle bad debts.

If banks have not restructured their debts and set aside enough provisions to handle bad debts, they will not be able to increase salaries or bonuses for their staff, managers, and executives. In addition, shareholders may not be able to receive dividends if they violate regulations.

If the risk provisions are not completed in accordance with regulations, banks will not be allowed to increase salaries or pay dividends. Photo: Anh Quan.

On November 29, State Bank Governor Nguyen Van Binh issued instructions on debt classification, risk provisioning and use. Accordingly, banks must reduce operating costs by all means. In addition, banks will not be allowed to increase salaries and bonuses for staff, especially those at the executive management level, nor will they be allowed to advance dividends for the 2013 fiscal year if they have not fully set aside risk provisions. Not only that, units will have to classify debt and restructure debt according to regulations.

Except for state-owned commercial banks and joint-stock banks with state-controlled capital, credit institutions must seek the opinion of the State Bank's provincial and municipal branches on advances, dividend distribution, and profits for 2013 before implementation.

This is not the first time the Governor has issued"steel" regulationsin dividend distribution, salary payment, and bonus payment for the entire system. Last year, to tighten discipline as well as create a source to handle bad debt, he also banned banks from increasing salaries and bonuses without setting up risk reserves according to regulations. In fiscal year 2012, a series of banks announced plans to pay dividends quite late, partly because they had to ask for the State Bank's opinion before doing so.

In 2012,profitAs well as salaries and bonuses of many units have decreased sharply because banks have to set aside more provisions as required.

According to Express