VietNamNet Bridge – State-owned Vietnam Asset Management Company (VAMC), launched in late July to clean up banks’ bad debts, is considering buying up the first non-performing loans (NPLs) from four banks burdened by high bad debt rates and which are obliged to sell NPLs to VAMC.

The banks it noted were Navibank, Saigon Commercial Joint Stock Bank (SCB), state-owned Agribank, and the Saigon-Hanoi Commercial Joint Stock Bank (SHB).

“SHB is preparing to sell debts to VAMC. Our bank listed the NPLs we want to sell to the state body. The exact figure will be announced after both sides carefully evaluate NPLs to ensure they meet VAMC requirements,” said SHB’s general director Nguyen Van Le.

Similarly, a Navibank executive said the bank was eager to sell bad debts to VAMC and had already completed its own list of debts to sell.

“It should be noted though, that the amount of debt we can sell to VAMC chiefly depends on its appraisals,” said the executive.

According to a VAMC source, this year it would not buy debts under market value but would rather buy NPLs via special bonds.

From now through the end of this year, the VAMC plans to issue $1.66 billion in special bonds for bad debt purchases.

The issue will go two to three rounds with the first already started on September 21 and running through October 30. In the first round the VAMC will issue $47.6 million in bonds to purchase NPLs from the four aforementioned banks.

This week, the VAMC and four relevant banks were reported to engage in appraising banks’ NPLs and purchase of first NPLs would take place next week.

Senior economist Bui Kien Thanh predicted, however, that although central bank regulations oblige banks with bad debt rates above 3 per cent to sell to the VAMC, many banks would avoid this in fear of their cross-holding structures being revealed to the public.

Agreeing with this possibility, economist Le Xuan Nghia said it would not be easy for banks to avoid the process as the State Bank would be firm in its enforcement of the policy.

Truong Thanh Duc, chairman of Basico law firm said, “I’m afraid using special bonds to purchase bad debts will not solve the problem at its core and it has been extremely difficult to facilitate a process to sell bad debts at auction to domestic and international organisations and individuals.”

Although there are a number of different opinions on VAMC’s actual efficiency, many experts believe that this year the state body will be in a position to successfully mitigate the bad debt issue to the point of $1.4-1.6 billion.

Source: VIR