Governor of the State Bank of Vietnam Nguyen Van Binh has set a newtarget to bring down non-performing loans (NPLs) to less than 3 percentby September.
The previous target of the banking industry was to bring down the rate by the end of this year.
According to the central bank's statistics, NPLs stood at 3.81 percent by the end of March this year.
Binhsaid that the new target is feasible, provided that all creditinstitutions step up and take drastic measures to handle NPLs to meetthe new deadline.
"Credit institutions must make accurate debtclassifications, adequately fund risk provisions, and actively sell NPLsto Vietnam Asset Management Company," Binh noted.
Binh addedthat the central bank's decision to extend the credit room of creditinstitutions will depend on the way they handle NPLs.
He pointedout that if necessary, the central bank can raise the credit growthtarget for this year to 17 percent, instead of 13-15 percent set earlierthis year, to boost economic growth.
Unlike previous years, credit growth in 2015 has been strong since early months, rising more than 6 percent in the first half.
According to experts, after almost three years of bank restructuring, there have been several gains.
"Systemicrisks in the banking sector has been contained and reduced, liquidityhas improved significantly, interest rates have fallen, and steps havebeen taken to reduce and resolve the issue of NPLs," IMF ResidentRepresentative Sanjay Kalra said in a statement on the central bank'swebsite.
Kalra noted that the operationalisation of Vietnam AssetManagement Company (VAMC) in 2013 was an important first step inrecognising that NPLs in the banking system needed a systemic approach(regardless of the varying estimates of NPLs – by commercial banks, theSBV, and others – which depended on incentives and specific assumptions,while there were significant data quality issues).
He added thatsince then, the VAMC has been actively purchasing NPLs from banks, butits pace needs to be accelerated. Banks have an extended period toprovision against NPLs sold to the VAMC, while significant legal hurdlesremain for the transfer of loan titles and collateral, which impede NPLresolution.
"To move this process forward quickly, the VAMCneeds greater authority over the disposition of collateral and legalimpediments, and the disposition of collateral in the distressed assetsmarket needs to be resolved," Kalra observed, adding that the VAMC alsoneeds a larger pool of resources – financial and human – to process NPLsthat enter the distressed assets market.
"Such a market in turnneeds enough buyers and sellers to be functional and may need externalparticipation and expertise," he concluded.-VNA
The previous target of the banking industry was to bring down the rate by the end of this year.
According to the central bank's statistics, NPLs stood at 3.81 percent by the end of March this year.
Binhsaid that the new target is feasible, provided that all creditinstitutions step up and take drastic measures to handle NPLs to meetthe new deadline.
"Credit institutions must make accurate debtclassifications, adequately fund risk provisions, and actively sell NPLsto Vietnam Asset Management Company," Binh noted.
Binh addedthat the central bank's decision to extend the credit room of creditinstitutions will depend on the way they handle NPLs.
He pointedout that if necessary, the central bank can raise the credit growthtarget for this year to 17 percent, instead of 13-15 percent set earlierthis year, to boost economic growth.
Unlike previous years, credit growth in 2015 has been strong since early months, rising more than 6 percent in the first half.
According to experts, after almost three years of bank restructuring, there have been several gains.
"Systemicrisks in the banking sector has been contained and reduced, liquidityhas improved significantly, interest rates have fallen, and steps havebeen taken to reduce and resolve the issue of NPLs," IMF ResidentRepresentative Sanjay Kalra said in a statement on the central bank'swebsite.
Kalra noted that the operationalisation of Vietnam AssetManagement Company (VAMC) in 2013 was an important first step inrecognising that NPLs in the banking system needed a systemic approach(regardless of the varying estimates of NPLs – by commercial banks, theSBV, and others – which depended on incentives and specific assumptions,while there were significant data quality issues).
He added thatsince then, the VAMC has been actively purchasing NPLs from banks, butits pace needs to be accelerated. Banks have an extended period toprovision against NPLs sold to the VAMC, while significant legal hurdlesremain for the transfer of loan titles and collateral, which impede NPLresolution.
"To move this process forward quickly, the VAMCneeds greater authority over the disposition of collateral and legalimpediments, and the disposition of collateral in the distressed assetsmarket needs to be resolved," Kalra observed, adding that the VAMC alsoneeds a larger pool of resources – financial and human – to process NPLsthat enter the distressed assets market.
"Such a market in turnneeds enough buyers and sellers to be functional and may need externalparticipation and expertise," he concluded.-VNA
