SBV orders tighter measures for bad debt management
The State Bank of Vietnam (SBV) this week required its branches nationwide to adopt stricter, more comprehensive measures to accelerate progress in restructuring debt and resolving non-performing loans (NPLs).
The move by the central bank is considered to be part of its efforts to meet the task assigned to the banking sector to reduce the number of NPLs to less than 3% of all loans by next year, a target approved by the National Assembly last month.
Guided by Document 9332/NHNN-TTGSNH, SBV Governor Nguyen Van Binh instructed the branches to closely monitor the NPLs of local credit institutions and their progress in handling these loans in accordance with the central bank's instructions. Regular assessment of the way NPLs are being handled is necessary in order to meet the central bank's target on schedule.
The branches must also make regular and close inspections of credit institutions, especially ailing and ineffective ones with high NPL ratios.
The branches were also instructed to improve cooperation efforts with the relevant local agencies to ease difficulties in dealing with guaranteed assets in order to speed up the process of resolving NPLs.
After a year of implementing strict measures to resolve NPLs including making risk provisions and selling bad debts on behalf of the Vietnam Asset Management Company (VAMC), the NPL ratios of many credit institutions have improved significantly.
VIB, for example, after accepting a profit reduction and setting aside roughly VND560 billion (US$26.29 million) for risk provisions, reported NPLs of 2.19% by the end of the third quarter, down 19% against the same period last year.
The VAMC reported that it has bought more than VND100 trillion (US$4.76 billion) in bad debts so far, of which, debts worth some VND65 trillion (US$3.10 billion) were purchased this year alone.
According to the Tuoi tre (Youth) newspaper, the company sold and recovered about VND4 trillion (US$190.48 million) of the debts.
VAMC Chairman Nguyen Quoc Hung told the newspaper that the firm's greatest challenge currently lay in determining how the debts can be sold while ensuring that the interests of both the banks and the borrowers are served.
A complete mechanism for dealing with property mortgages has not yet been put in place. Thus, accelerating debt processing is still difficult, he said.
"If the VAMC sold debts at any price, the damage for the banks and the borrowers would be significant. Besides, it is not easy to find bad-debt buyers at a time when market conditions are still tough," he added.
In a move to ease the pressure on the VAMC, the central bank has so far submitted to the government a draft document revising Decree No53/2013/ND-CP, which regulates the establishment and organisation of the VAMC.
In the draft, the central bank suggests that the charter capital of the company be raised to VND2 trillion (US$95.24 million) from the current VND500 billion (US$23.81 million).
Guided by Document 9332/NHNN-TTGSNH, SBV Governor Nguyen Van Binh instructed the branches to closely monitor the NPLs of local credit institutions and their progress in handling these loans in accordance with the central bank's instructions. Regular assessment of the way NPLs are being handled is necessary in order to meet the central bank's target on schedule.
The branches must also make regular and close inspections of credit institutions, especially ailing and ineffective ones with high NPL ratios.
The branches were also instructed to improve cooperation efforts with the relevant local agencies to ease difficulties in dealing with guaranteed assets in order to speed up the process of resolving NPLs.
After a year of implementing strict measures to resolve NPLs including making risk provisions and selling bad debts on behalf of the Vietnam Asset Management Company (VAMC), the NPL ratios of many credit institutions have improved significantly.
VIB, for example, after accepting a profit reduction and setting aside roughly VND560 billion (US$26.29 million) for risk provisions, reported NPLs of 2.19% by the end of the third quarter, down 19% against the same period last year.
The VAMC reported that it has bought more than VND100 trillion (US$4.76 billion) in bad debts so far, of which, debts worth some VND65 trillion (US$3.10 billion) were purchased this year alone.
According to the Tuoi tre (Youth) newspaper, the company sold and recovered about VND4 trillion (US$190.48 million) of the debts.
VAMC Chairman Nguyen Quoc Hung told the newspaper that the firm's greatest challenge currently lay in determining how the debts can be sold while ensuring that the interests of both the banks and the borrowers are served.
A complete mechanism for dealing with property mortgages has not yet been put in place. Thus, accelerating debt processing is still difficult, he said.
"If the VAMC sold debts at any price, the damage for the banks and the borrowers would be significant. Besides, it is not easy to find bad-debt buyers at a time when market conditions are still tough," he added.
In a move to ease the pressure on the VAMC, the central bank has so far submitted to the government a draft document revising Decree No53/2013/ND-CP, which regulates the establishment and organisation of the VAMC.
In the draft, the central bank suggests that the charter capital of the company be raised to VND2 trillion (US$95.24 million) from the current VND500 billion (US$23.81 million).