Tu Hoang Binh tried to demonstrate to the NA the efforts of the banking sector to cope with bad debt at a meeting last weekend, but NA deputies still could not rest assured. He stated the banking system had been actively restructuring corporate debt. "From April 2012 to present, the total amount of debt that the banking system has restructured is VND284 trillion, accounting for 10% of the total outstanding loans," he said. However, he did not explain to the NA deputies what "restructure" really means. He revealed that the total bad debt handled by risk provision was around VND70 trillion in 2012, and approximately VND7.5 trillion in the first four months of 2013. He pledged banks would make provision worth VND68 trillion from now until the end of the year to tackle bad debt. Besides, he informed Vietnam National Asset Management could deal with VND40-70 trillion worth of bad debt in 2013. "With the efforts of the banking system, we have removed a large portion of bad … [Read more...] about NA deputies grapple with bad debt confusion
Dealing with bad debts
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
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
Although the Minister of Planning and Investment affirmed to “not use budget capital to buy bad debts of banks,” many National Assembly deputies wondered where does VND100 trillion ($5 billion) come from to buy bad debts, at the proposal of the central bank. Minister of Planning and Investment Bui Quang Vinh. At the Q&A session on the afternoon of June 13, deputy Chu Son Ha of Hanoi asked: Will a company be set up to purchase bad debts of banks, with VND100 trillion of capital? Where does the capital come from? Will it affect the government’s goal on curbing inflation? Deputy Tran Thi Quoc Khanh of Hanoi questioned Minister of Planning and Investment Bui Quang Vinh: the comprehensive plan on restructuring the economy, connecting with changing the growth model, said that the state budget may have to pay part of the cost to deal with bad debts of commercial banks, please tell us what is the ground for that proposal? What is your responsibility for raising that … [Read more...] about Where is cash for purchasing bad debts?
VAMC bad debt settlement ability doubted Da Ban By Da Ban - The Saigon Times Daily HCMC – The draft decree on establishment of Vietnam Asset Management Company (VAMC) was not passed at the meeting of the Government last week as there were still doubts over its ability to resolve bad debt, said an official from the Ministry of Justice. The Ministry of Justice has collected opinions of related agencies on the draft decree on establishment and operation of VAMC. According to the draft, VAMC will operate under a special mechanism prescribed by the Government to tackle bad debt, expand credit with reasonable interest rates, improve liquidity and ensure credit safety. A principle for VAMC establishment stated in the draft decree is that State money is not used to deal with the consequences arising from operations of credit institutions. However, it seems VAMC would mainly resolve inter-bank debts, while the greatest concern now is debts owed by enterprises, said the Department of … [Read more...] about VAMC bad debt settlement ability doubted