Credit institutions recover nearly 1.2b USD of bad debts in Q1 2020 hinh anh 1A transaction office of the Bank for Investment and Development of Vietnam (BIDV) (Photo: VNA)

Hanoi (VNS/VNA) - Credit institutions in Vietnam settled more than 26.94 trillion VND (1.17 billion USD) of non-performing loans (NPLs) in the first quarter of this year.

The latest report released this week by the State Bank of Vietnam (SBV) showed credit institutions handled nearly 1.077 quadrillion VND of NPLs from 2012 to the end of March this year.

With the recovery, the bad debt ratio of the whole banking system has remained under control at 1.77 percent of the total outstanding loans by the end of the first quarter, meeting the Government’s target of keeping the rate below 3 percent in 2020.

To continually boost the recovery of bad debts, SBV governor Le Minh Hung has asked credit institutions to review and provide detailed roadmaps and solutions for settling their bad debts each year until 2022.

Credit institutions have also been asked to look for buyers for the debts they sold to the Vietnam Asset Management Company (VAMC), while the VAMC has been required to speed up the handling of bad debts and collateral the company purchased following market-based mechanisms.

The SBV has also issued regulations and policies in line with international practices to improve safety standards in banking, which has contributed to stronger governance and risk management capability under Basel II international banking standards.

In a recent report, Moody's Investors Service pointed out that downside risks to asset quality of Vietnamese banks can arise from disruptions caused by the COVID-19 pandemic, which, if prolonged, will lead to increases in non-performing loans in the manufacturing, trade and other sectors, given Vietnam's large exposure and close ties to global supply chains.

According to the rating agency, as for profitability, the gap will widen between banks that have adopted the new Basel II capital standards and those that have not.

Moody's also expects that in 2020, the country's central bank will grant higher limits for loan growth to banks that have adopted Basel II and maintain good financials. The higher growth limits will translate into larger gains in earnings and widen the profitability gap between banks that have and have not adopted the new capital standard./.