VietNamNet Bridge - By the end of October, the Vietnam Assets Management Company (VAMC) purchased VND11 trillion of bad debts from 14 banks, despite the fact that more than 20 banks had lined up to sell about VND38 trillion of bad debts.

"The original value is VND13 trillion on books but we purchased for over VND11.1 trillion," said VAMC’s Vice President – Mr. Nguyen Quoc Hung.

Last week alone, VAMC bought nearly VND3 trillion of bad debts. A representative of VAMC said about 67 percent of the loans are secured by real estate. VAMC has confirmed to not purchase the debts of the Vietnam Shipbuilding Industry Group (Vinashin) since the government has its own mechanisms for Vinashin debts.

After three months of operation, about 20 banks have registered to sell debts to VAMC. A VAMC official said the bad debts that banks wanted to handle through VAMC are estimated at VND38 trillion but VAMC cannot look up and approve all of the profiles.

More than VND10 trillion of bad loans was temporarily removed from the balance sheet of assets of the banks and they received the special bonds of VAMC, which can refinance up to 70 percent of its value.

However, Deputy Governor of the State Bank – Mr. Dao Minh Tu said that so far no bank has used the finance. "This shows that the banks’ liquidity is still good," he said.

Speaking in the National Assembly debate on November 1, the State Bank Governor Nguyen Van Binh said that since the campaign began (2012), the system has handled more than VND100 trillion in bad debt, though it did not use budget capital. He confirmed that without measures such as debt restructuring, debt relief by risk reserve and through VAMC, bad debts of the whole banking system can increase by 10 percent.

Regarding the "output" for the debt that VAMC bought, Governor Binh said there were many local and foreign investors are interested in them. However, he admitted that to have a concentrated market for bad debts, Vietnam needs to have a mechanism so that the purchase process will be completed quickly.

It is expected that in 2013 VMC will temporarily remove approximately VND35-40 trillion of bad debts for credit institutions and VND150 trillion in 2014.

VAMC is a 100-percent state owned company managed by the State Bank of Vietnam (SBV). VAMC officially went into operation on 26/7, with a chartered capital of VND500 billion. The company is aimed at reviving sluggish credit extension, which underpinned the slowdown of the nation’s growth rate last year to the lowest since 1999. The VAMC buys bad debts using its own funds or issue five-year, zero-coupon “special” bonds to the banks in exchange. The bonds may be used to obtain refinancing loans from the central bank to boost lending and stimulate an economy. The VAMC will try and auction the NPLs to investors within five years.

US1 = VND21,000

S. Tung