Credit institutions to shoulder burden of debt restructuring
The PM's approval of the projects "Dealing
with bad debts in the credit institutions' system" and "Establishing
the Viet Nam Asset Management Company" was outlined in Decision
843/QD-TTg, dated May 31, 2013.
Based on this, the SBV governor
issued a plan to implement the necessary provisions (Document
8421/NHNN-TTGSNH), calling on credit institutions (CIs) to develop and
implement plans to settle bad debts and improve credit quality within
the 2013-15 period, as part of the overall plan to restructure credit
institutions, according to the Vietnam Business Forum.
These changes remain in line with the spirit of the Government's plan to restructure the credit system.
The governor's objective is to clear away the current bad debts,
effectively control and enhance credit quality, and successfully meet
the objectives of the restructuring plan.
The governor has
called on banks to assess bad debts and credit quality from 2011, 2012
and the first six months of 2013, including bad debts by credit level or
those created by buying corporate bonds, fiduciary bonds, and credit.
Bad debts must also be divided according to collateral value and
provisions for risk. Bad debts with and without collateral must be
recorded. Bad debts classified by State-owned enterprises and other
businesses, individuals or households; bad debts classified by industry;
and bad debts incurred by affiliates, transaction offices, branches and
units of CIs will also have to be recorded.
In addition,
Vietnamese banks are also required to perform analyses and evaluation of
bad debts' data and structure as of June 30, 2013, based on the
following classifications: bad debts defined under Decision
493/2005/QD-NHNN, dated April 22, 2005, and Decision 18/2007/QD-NHNN,
dated April 25th 2007.
This does not include those bad debts
defined by the SBV governor under Decision 780/QD-NHNN, dated April 23,
2012, or bad debts defined under Circular 02/2013/TT-NHNN, dated January
21, 2013, on asset classification, provisions and the provisioning
method, as well as using reserves to handle the risks associated with
the banking activities of CIs and foreign bank branches.
CIs
also need to review, produce statistics, assess the status of loans
including those with interest due but unpaid and added to the total
amount of the loan.
Total debts must also be clearly reported
according to classification. CIs must accurately evaluate the level of
risk for loans and the financial situation and business activities
related to them.
In particular, CIs should propose solutions to
deal with the estimated bad debts and provide an estimate of the number
of bad debts that can be resolved with each solution and for each year
up to 2015, including loans sold to the Vietnam Asset Management
Company.
They should also create solutions to deal with the
bad debts of affiliates, branches, and other units of credit
institutions.
In terms of improving credit quality, CIs need to
develop measures to enhance the quality of appraisal and lending
decisions, including monitoring changes in credit conditions,
record-keeping, processing, procedures, the process of credit appraisal
and approval, and the responsibilities of individuals and units involved
in the process.
Measures must be adopted to improve
monitoring to ensure loans are used for the purposes stated in their
credit agreements.
Finally, the governor requires CIs to
introduce measures to strengthen internal inspections and control as
well as conduct internal audits on credit quality.-VNA