VietNamNet Bridge - Five years have elapsed since the day the State Bank released figures about banks’ bad debts, but the problem still has not been settled. Vietnam will need another five years to deal with it.

 

A banking expert, who acted as a critic for research work on bad debt, commented: “The bad debt settlement in Vietnam has incurred a ‘genetic error’”.

“Once genetic error exists, it is impossible to settle the problem to the root,” he said. “If we cut one tumor, another will appear in other places.”

Official reports showed that a big amount of bad debt has been settled, which helped reduce the bad debt ratio from over 17 percent in September 2012 to 2.62 percent in March 2016.

However, some analysts believe bad debt could be up to 10 percent.

It is estimated that the bad debt still at VAMC’s (the Vietnam Asset Management Company) is about VND220 trillion. The total outstanding loans had reached VND4,800 trillion by the end of March 2016, while the bad debt ratio was about 4.6 percent. As such, if counting on the 2.62 percent, the total bad debt ratio would be 7.2 percent.

However, this might not be the final figure. The analysts said bad debt could also be found in normal outstanding loans because banks do not classify them as ‘bad debts’.

Five years have elapsed since the day the State Bank released figures about banks’ bad debts, but the problem still has not been settled. Vietnam will need another five years to deal with it.

“I am afraid that some commercial banks try to conceal their bad debts,” said Nguyen Tri Hieu, a renowned banking expert.

“What worries me is that some banks have converted their liabilities into earning assets in order to fabricate beautiful CARs (capital adequacy ratio),” he said in an interview to Bizlive. 

“Therefore, the CAR could be much lower than 12 percent,” he warned.

The settlement of debt is work which Vietnam has been doing for five years. And at the first regular working session of the new government in April 2016, the task was once again put into the agenda.

The resolution released after the meeting says that the State Bank of Vietnam has been assigned to review the restructuring of credit institutions and the bad debt settlement in 2011-2015, and build up a plan on debt settlement for 2016-2020.

This means that Vietnam spent five years to settle bad debts, and it still needs another five-year period to deal with the process.

The acritic commented that the State Bank is considering two new measures to fix the ‘genetic error’: 1) buying bad debts at market prices and 2) VAMC buing bad debts with cash.


Thanh Mai