Vietnam sets to speed up bad debt resolution in next two years

15-Sep-2018 Intellasia | Hanoi Times | 6:00 AM Print This Post

The banking industry will have to work hard to reduce the ratio of non-performing loans (NPLs) including both NPLs owned by credit institutions and the Vietnam Asset Management Company (VAMC) from the current 6.6 percent to below 3 percent in 2020.

Deputy prime minister Vuong Dinh Hue has recently required the State Bank of Vietnam (SBV) to speed up the resolution of NPLs, ensuring the NPL ratio of the entire banking system to reduce to a safe level according to international rules by the year.

According to the latest report from SBV, the banking system resolved VND785.93 trillion (US$33.44 billion) of NPLs from 2012 to the end of June 2018, of which VND58.8 trillion (US$2.5 billion) was settled in the first half of this year.

Notably, Nguyen Van Du, the SBV’s deputy chief inspector, said since the application of the National Assembly’s Resolution No. 42 on bad debts from late last year, which allows credit institutions and VAMC to rapidly repossess collateral if a borrower defaults, measures to settle bad debts and prevent new ones from arising had been taken synchronously, helping credit institutions (CIs) and the VAMC better manage bad debts.

According to Du, as of June 30 this year, CIs had handled VND138.29 trillion (US$5.88 billion) of bad debt according to Resolution No. 42, contributing to reducing the bad debt ratio in CIs from 2.46 percent on December 31, 2016 to 2.09 percent at the end of June this year.

However, if including NPLs sold to VAMC, the bad debt ratio of the entire banking system remained high at some 6.6 percent, Du said, adding it thus will be a hard work for SBV, VAMC and banks to bring it down to below 3 percent in 2020.

Taking synchronous measures

For VAMC alone, the SBV’s subsidiary plans to resolve at least VND140 trillion (US$5.95 billion) of NPLs from now until 2020, of which VND34.5 trillion (US$1.46 billion) will be settled this year.

In order to meet the plans, SBV will submit to the prime minister a proposal to direct competent ministries and agencies to soon issue more detailed guidance on the implementation of the Resolution No. 42.

Specifically, the Ministry of Natural Resources and Environment should issue regulations on guiding procedures related the transfer of bad debts’ collaterals, which are unfinished real estate projects.

Meanwhile, the Supreme People’s Court should guide the application of the summary procedures in the dispute settlement of bad debts’ collaterals at court.

The SBV is also expected to soon put a debt trading market into operation to help VAMC resolve bad debts more effectively.

Together with VAMC, CIs have also planned to put more NPLs and collateral of default borrowers on auction in a move to speed up the resolution of bad debts.

Sacombank, for example, has recently announced that it will hold an auction this month to sell 11 properties related to non-performing loans and collaterals of its borrowers at a starting price of some VND20 trillion (US$851 million). Among them, the Phong Phu Industrial Zone, which covers an area of 134 hectares in HCM City’s Binh Chanh district, has a starting price of over VND7.6 trillion (US$323 million).

Agribank has also planned to hold 12 auctions this month to sell bad debts and collateral totalling a starting price of more than VND470 billion (US$20 million).

After repurchasing all NPLs sold to the VAMC, VietinBank has recently also announced it will be selling collateral to recoup the debts, including those of Song Day-Hong Ha Oil and Gas Joint Stock Company and NEM Trading Joint Stock Company.

Analysts believed about the prospect of bringing down the bad debt ratio to below 3 percent in 2020, given by enhanced legal frameworks in Resolution No. 42 and improved health of the banking system.

http://www.hanoitimes.vn/economy/2018/09/81E0CC75/vietnam-sets-to-speed-up-bad-debt-resolution-in-next-two-years/

 


Category: Finance, Vietnam

Print This Post

Comments are closed.