SBV orders tighter measures for bad debt management
The State Bank of Vietnam
(SBV) this week required its branches nationwide to adopt stricter, more
comprehensive measures to accelerate progress in restructuring debt and
resolving non-performing loans (NPLs).
The move by the central
bank is considered to be part of its efforts to meet the task assigned
to the banking sector to reduce the number of NPLs to less than 3
percent of all loans by next year, a target approved by the National
Assembly last month.
Guided by Document
9332/NHNN-TTGSNH, SBV Governor Nguyen Van Binh instructed the branches
to closely monitor the NPLs of local credit institutions and their
progress in handling these loans in accordance with the central bank's
instructions. Regular assessment of the way NPLs are being handled is
necessary in order to meet the central bank's target on schedule.
The
branches must also make regular and close inspections of credit
institutions, especially ailing and ineffective ones with high NPL
ratios.
The branches were also instructed to improve cooperation
efforts with the relevant local agencies to ease difficulties in dealing
with guaranteed assets in order to speed up the process of resolving
NPLs.
After a year of implementing strict measures to resolve
NPLs including making risk provisions and selling bad debts on behalf of
the Vietnam Asset Management Company (VAMC), the NPL ratios of many
credit institutions have improved significantly.
VIB, for
example, after accepting a profit reduction and setting aside roughly
560 billion VND (26.29 million USD) for risk provisions, reported NPLs
of 2.19 percent by the end of the third quarter, down 19 percent against
the same period last year.
The VAMC reported that it has bought
more than 100 trillion VND (4.76 billion USD) in bad debts so far, of
which, debts worth some 65 trillion VND (3.10 billion USD) were
purchased 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 Hung
told the newspaper that the firm's greatest challenge currently lay in
determining how the debts can be sold while ensuring that the interests
of both the banks and the borrowers are served.
A complete
mechanism for dealing with property mortgages has not yet been put in
place. Thus, accelerating debt processing is still difficult, he said.
"If
the VAMC sold debts at any price, the damage for the banks and the
borrowers would be significant. Besides, it is not easy to find bad-debt
buyers at a time when market conditions are still tough," he added.
In
a move to ease the pressure on the VAMC, the central bank has so far
submitted to the government a draft document revising Decree
No53/2013/ND-CP, which regulates the establishment and organisation of
the VAMC.
In the draft, the central bank suggests that the
charter capital of the company be raised to 2 trillion VND (95.24
million USD) from the current 500 billion VND (23.81 million USD).-VNA