A banking bad debt trading company would be necessary, yet its operation should be made public so as not to hurt the state budget.
According to economic expert Nguyen Tri Hieu, commercial banks’ bad debts now account for 10pct of the total outstanding loans, equivalent to some USD 14 billion.
The initial capital of this firm is estimated to 100 trillion dong which could hardly be fully funded by the state budget given current close monitoring of public spending. Yet, state budget may be the principal financing source due to commercial banks’ presently modest risk provisions and the unappealing nature of bad debts to domestic and foreign banks.
Therefore, it is very likely bonds and bills of credits would be issued in the time to come, buyers of which have yet remained unknown.
Many economists believed the firm trading commercial banks’ bad debts should be established under the public private partnerships (PPP) model. Accordingly, the state would contribute some 30pct-40pct of the capital and commercial banks themselves should mobilise the remainder. Any banks that fail to make capital contribution may not be assisted to tackle bad debts.
However, Dr Tran Hoang Ngan, vice Rector of HCM City National University protested the establishment of a debt trading firm; rather, a committee on handling banks’ bad debts should be set up and put under the principal management of the central bank accompanied by relevant ministries and agencies.
Earlier, the Governor underlined capital for purchasing bad debts would be mobilised from a range of sources. The likely established company is expected to facilitate capital flows thorough the economy, yet which specific resources and operation style to be deployed are currently the matter in question.