VietNamNet Bridge – Experts have warned that the Vietnam Asset Management Company (VAMC) may be “jobless,” because it may have no debt to trade.

VAMC has been given a big juridical capacity – handling the bad debts of the credit institutions, thus helping put the capital flow through in the national economy. However, while having been given the big power, its financial capability is modest with the capital of VND500 billion, and the legal framework is not convincing enough.

Nguyen Tri Hieu, a banking expert, has expressed his worry that the decision by the State Bank on delaying the implementation of the Circular 02 on classifying debts in accordance with new criteria would put big difficulties for VAMC’s operation.

“The Circular 02 should have been implemented immediately. However, as the implementation has been delayed, it’s highly possible that VAMC would have no bad debts, or have no goods, to buy,” Hieu said.

The expert has also pointed out the problem in the financial leverage ratio of VAMC.

The powerful company has the modest capital of VND500 billion. Meanwhile, it is hoped to create miraculous thing. The State Bank hopes it can handle VND40,000-70,000 billion worth of bad debts, while the National Finance Supervision Council hopes it can settle VND100 trillion.

This means that the finance leverage ratio of VAMC is 100/1.

In general, the ratio of a bank is 10/1 on average, while the ratio of 15/1 means “risk” to the bank, and the 20/1 ratio would mean “high risk.” Meanwhile, the ratio of VAMC, a super national company is 100/1, which is really technically unconvincing.

In principle, VAMC would buy debts from banks and pay in “special bonds.” These must not be the government bonds, or the corporate bonds guaranteed by the government (like the ones of the Vietnam Development Bank or the Bank for Social Purposes), and the State Bank’s bonds.

VAMC is a company and it operates under the Enterprise Law. This means that the bonds to be issued by VAMC would be a corporate bond. What will happen if the company, which issues corporate bonds, operates ineffectively?

Therefore, it is highly possible that the commercial banks, which hold VAMC’s bonds, would discount the bonds for money. It’s still unclear about the discount rate, because the State Bank still needs to discuss with the Ministry of Finance on the issue.

As such, commercial banks would rather conceal their bad debts than selling the bad debts to VAMC. No one wants others to know that it is a client of VAMC.

The State Bank, while saying that Hieu has his reasons to worry about the VAMC’s operation, has affirmed that in the current circumstances, the VAMC’s model is still highly feasible.

Regarding the chartered capital of VAMC, a senior official of the State Bank said even if VAMC had a big capital, the sum of money proves to make nothing of the total bad debts in the banking system. Things would depend on the bonds to be issued by VAMC.

Disagreeing with Hieu, the senior official believes that banks would like the bonds to be issued by VAMC, because VAMC’s bonds are accepted by the State Bank, which means that the bonds are just like the corporate bonds guaranteed by the government.

TBKTVN