Increasing capital flow to cope with bad debt By Ngoc Tran in HCMC Staffers of a commercial bank in HCMC handle stacks of Vietnam dong banknotes. By end-2011, the total amount lent to businesses had reached around VND2,580,000 billion, of which VND258,000 billion has now turned bad and half of this bad debt is irrecoverable - Photo: TL The State Bank of Vietnam has proposed setting up a company with initial capital of VND100,000 billion to trade bad debt in the banking system. Is it possible that this company alone can resolve the problem? High on the country’s economic agenda this year is the restructuring of the banking system to make it healthier and more efficient. In doing so, the authorities will have to deal with hefty bad debt. Ambivalence about a debt trading company According to Nguyen Van Binh, governor of the State Bank of Vietnam, bad debt held by banks has risen to 10% of total funds borrowed, almost the same as the ratio forecast by foreign organizations. By … [Read more...] about Increasing capital flow to cope with bad debt
Bad debt allowance
A view of a Maritime Bank branch in Ho Chi Minh City. Economists warn that a central bank plan to buy banks’ non-performing assets could bring back inflation Economists say the central bank should be cautious with its plan to buy distressed debt from banks to avoid too fast an increase in money supply, which could again spark off high inflation. The plan to establish a company under the management of the State Bank of Vietnam to trade bad debt worth some VND100 trillion (US$4.8 billion) was mooted after loans contracted in the first five months. Though no further details have been announced, Le Xuan Nghia, former vice chairman of the National Financial Supervisory Council, said the news of the debt relief plan has cheered up the market. The increasing bad debts have made banks hesitant to lend, stymieing credit expansion, and they would boost lending once the bad debt problem is resolved, he said. Truong Van Phuoc, general director of Eximbank, said a system to trade … [Read more...] about Central bank urged to tread carefully with bad debt bailout
Governor of the State Bank of Vietnam Nguyen Van Binh said the bad debt ratio has increased from 3.2 percent earlier this year to 3.6 percent by mid April. However, other calculations show that the bad debt ratio is 3-4 times higher than the released figure. The 2012 annual report about Vietnam’s economy conducted by the Vietnam Center for Economics and Policy Research VEPR under the Economics University, an arm of the Hanoi National University, shows that the bad debt ratio of the Vietnamese banking system is estimated at between 8.25 and 14.01 percent. The report has also shown the forests by other institutions about the unknown. According to StoxPlus, the average bad debt ratio of the analyzed banks is 2.3 percent. Meanwhile, Fitch Ratings believes that the Vietnamese banks’ debt ratio is at 13 percent. Quoting Ho Ba Tinh, an analysis, the research team said the bad debt ratio of banks may reach 7-8 percent, or even over 10 percent, or about 300 trillion … [Read more...] about Vietnamese banks’ bad debt ratio remains an unknown
The non-performing loan (NPL) situation in Vietnam proves to be worse than previously thought. Dealing with bad debts is one of the most important things Vietnam needs to do in the banking restructuring. The Standard & Poor's question Together with Moody, Fitch Rating and Credit Suisse, Standard & Poor (S&P) Câu hỏi của Standard & Poor has paid its special attention to the macroeconomic and financial problems in Vietnam in recent years. In early November 2011, in its latest report, S&P lowered its assessment about the risk of the Vietnamese banking system from the ninth grade to the 10th, the lowest in the 10-scale ranking of the credit rating firm. This means that in the eyes of S&P, Vietnamese banking system is facing a very high risk level. With the adjustment in the latest report, Vietnamese banking system has been put together with Greece and Belarus, the economies with very high risks. What are the reasons which make S&P keep such a … [Read more...] about Dealing with bad debts, how?
Banks in Vietnam settled a total bad debt of VND85 trillion (USD4.04 billion) by themselves between early 2012 and the end of July this year, according an official from the State Bank of Vietnam (SBV). Bad debt is not only an issue for banks but also affects enterprises as well as the whole economy. SBV Deputy Governor Dang Thanh Binh said, local banks have been actively dealing with their bad debts. The settlement of debts, mounting up to VND85 trillion, is good news for the banking sector. The rate of bad debt in June of this year is down 4.68%, much lower than what was forecast. Binh noted that bad debt is not only an issue for banks but also affects enterprises as well as the whole economy. SBV has instructed to restructuring eight commercial joint stock banks with ineffective operations. Three among the four big state-owned banks namely Vietcombank, VietinBank and BIDV have also been urged to privatise. The deputy governor added that from now to 2015, SBV will try to … [Read more...] about State bank official: VND85 trillion in bad debts settled