Bad Debt Settlement Project, Asset Management Company Establishment Approved have 704 words, post on vccinews.com at 2013-06-25 17:12:46. This is cached page on Talk Vietnam. If you want remove this page, please contact us.
The Prime Minister has issued Decision 843/QD-TTg to approve the scheme on settlement of non-performing loans (NPLs) of credit institutions and the scheme on establishment of Vietnam Asset Management Company (VAMC).
Accordingly, Prime Minister Nguyen Tan Dung has assigned the State Bank of Vietnam (SBV) as the leading agency in coordinating with ministries, relevant agencies and People’s Committees of centrally governed provinces and cities to resolve NPLs of credit institution system. The SBV is tasked to issue the Decision on the establishment of VAMC, approve VAMC’s Regulations of Incorporation, and coordinate with the Ministry of Finance and other ministries and relevant agencies to formulate and submit to the PM the plan for resolving NPLs of the Bank for Social Policies in 2013.
The SBV is also tasked to guide and monitor the compliance of credit institutions and their asset management companies (AMCs) with NPL resolutions and objectives as stipulated in the two schemes. The central bank is also assigned to coordinate with the Ministry of Information and Communications, relevant agencies and organisations, People’s Committees of centrally governed provinces and cities to disseminate the NPL resolution schemes in order to create high public consensus and support for the role, significance, objectives, policies and solutions to NPL settlement by the system of credit institutions.
This decision also specifies that in case whereby credit institutions deliberately conceal NPLs and fail to strictly implement the measures approved by the Prime Minister and the guidance of the SBV in resolving NPLs, the SBV will comprehensively supervise and/or require to make compulsory auditing of the violating institutions; restrict to expand the scope, scale and locations of their operations; restrict and suspend or temporarily suspend a number of banking operations; limit distribution of dividends and the transfer of shares and assets; impose one or a number of prudent ratios higher than the set level. Besides, the central bank can require them to increase charter capitals in order to meet the requirements of their safe and sound banking operations; decide to restrict their credit growth when needed; apply several monitoring measures if necessary; and take other measures in line with law.
The SBV is also tasked to coordinate with the relevant ministries and agencies to provide advice to and assist the Government to regularly monitor and review the implementation of the Scheme; and make timely report to the Party Politburo to deal with the arising problems beyond the competence of the Government.
Credit institutions are required by the PM to strictly comply with law and the guidance of the Government, the PM and the SBV in resolving NPLs; develop and implement the plans on NPL resolution and improve credit quality and to take active measures to control NPLs; to improve governance, especially risk and credit management; to comply with the SBV regulations on prudent operations, credit extension, loan classification and provisioning; and to make periodical reports on NPL resolution at the SBV request.
At a recent seminar on “Bad debts, interest rates and impacts on Vietnamese stock market” organised by Vietcombank Securities Co., Ltd (VCBS), Dr Le Xuan Nghia, former Vice Chairman of National Financial Supervisory Commission (NFSC), said VAMC is allowed to issue special bonds to purchase buy non-performing loans at credit institutions. VAMC will purchase bad debts at the book value rather than market prices because the second option may lead to the bargaining of credit institutions on specific items and this will require much of time. The use of book value will transfer all bad debts of credit institutions to VAMC. VAMC is set up not only to transfer bad debts from the banking system to VAMC but also buy and sell real debts. This will decide the success of bad debt settlement.
Speaking of VAMC’s NPL purchase method, he said VAMC bonds have maturity of only five years. After transferring bad debts to VAMC, credit institutions will receive government bonds and set aside risk provisions of 20 percent instead of 50 percent for bad debts classified as Group 4 and 100 percent for bad debts classified in Group 5.
Credit institutions can mortgage special bonds to borrow money from the State Bank. It means that they will have money to improve liquidity and finance capital needs of economic sectors.