SBV orders tighter measures for bad debt management

The State Bank of Vietnam(SBV) this week required its branches nationwide to adopt stricter, morecomprehensive measures to accelerate progress in restructuring debt andresolving non-performing loans (NPLs).

The move by the centralbank is considered to be part of its efforts to meet the task assignedto the banking sector to reduce the number of NPLs to less than 3percent of all loans by next year, a target approved by the NationalAssembly last month.

Guided by Document9332/NHNN-TTGSNH, SBV Governor Nguyen Van Binh instructed the branchesto closely monitor the NPLs of local credit institutions and theirprogress in handling these loans in accordance with the central bank'sinstructions. Regular assessment of the way NPLs are being handled isnecessary in order to meet the central bank's target on schedule.

Thebranches must also make regular and close inspections of creditinstitutions, especially ailing and ineffective ones with high NPLratios.

The branches were also instructed to improve cooperationefforts with the relevant local agencies to ease difficulties in dealingwith guaranteed assets in order to speed up the process of resolvingNPLs.

After a year of implementing strict measures to resolveNPLs including making risk provisions and selling bad debts on behalf ofthe Vietnam Asset Management Company (VAMC), the NPL ratios of manycredit institutions have improved significantly.

VIB, forexample, after accepting a profit reduction and setting aside roughly560 billion VND (26.29 million USD) for risk provisions, reported NPLsof 2.19 percent by the end of the third quarter, down 19 percent againstthe same period last year.

The VAMC reported that it has boughtmore than 100 trillion VND (4.76 billion USD) in bad debts so far, ofwhich, debts worth some 65 trillion VND (3.10 billion USD) werepurchased this year alone.
According to the Tuoi tre(Youth) newspaper, the company sold and recovered about 4 trillion VND(190.48 million USD) of the debts.

VAMC Chairman Nguyen Quoc Hungtold the newspaper that the firm's greatest challenge currently lay indetermining how the debts can be sold while ensuring that the interestsof both the banks and the borrowers are served.

A completemechanism for dealing with property mortgages has not yet been put inplace. Thus, accelerating debt processing is still difficult, he said.

"Ifthe VAMC sold debts at any price, the damage for the banks and theborrowers would be significant. Besides, it is not easy to find bad-debtbuyers at a time when market conditions are still tough," he added.

Ina move to ease the pressure on the VAMC, the central bank has so farsubmitted to the government a draft document revising DecreeNo53/2013/ND-CP, which regulates the establishment and organisation ofthe VAMC.

In the draft, the central bank suggests that thecharter capital of the company be raised to 2 trillion VND (95.24million USD) from the current 500 billion VND (23.81 million USD).-VNA