The international credit rating firm Moody’s Investors Services said in its latest report on Vietnam sovereign credit assessment that handling local banks’ bad debts would cost a great deal.
The report warned that bank asset value could be worse than the announced 3.1 percent ratio of bad debt over total outstanding loans as of the end of 2011. The bad debt ratio among commercial banks since the early year could almost unpredictable considering the different figures released by the State Bank of Vietnam, this firm concerned.
This agency said in July that the rate as of May 2012 jumped to 4.5pct of total outstanding loans. In the meantime, the figure reportedly rocketed to 10pct, said Governor Nguyen Van Binh without indicating when the statistics were compiled.
Apparently, deteriorated asset value has further weakened banks’ loss absorption capacity as well as hampered funding for economic growth, leading first-seven-month credit growth mostly to level off, said Moody’s.
Notably, a comprehensive package for tackling bad debts has yet been available by far. The government earlier unveiled intention to set up a national debt and asset management company with a view to concentrate on banks’ bad debts, which has, however, yet seen any progression.
The unpredictable government’s bailout and low transparency could make implications of banking restructuring on the state budget uncertain. However, costs associated with this process could dramatically surge since Vietnam’s banking system is the biggest among other nations of similar sovereign credit ratings, said the report.
Also, Vietnam’s foreign and local currency bond ratings remains B1 making the outlook further negative.