Recently, the Governor of the State Bank of Vietnam has signed Decision 1085/QD-NHNN on issuing the action plan of the banking sector to implement the project “Resolve the non-performing loans (NPL) of the Credit institutions” and the project “Establishment of Vietnam Asset Management Company of the Credit Institutions of Vietnam” under Decision 843/QD-TTg of the Prime Minister issued on May 31, 2013.
Accordingly, under the scope of functions and duties assigned, the units of the State Bank of Vietnam and the credit institutions shall comply to do the duties and propose the solutions to settle the bad debt under the provisions of Decision 31 843/QD-TTg dated on 31/5/2013 of the Prime Minister and the content of the ” Resolve non-performing loans of the Credit Institutions”. The project “”Establishment of Vietnam Asset Management Company of the Credit Institutions of Vietnam” under Decision 843/QD-TTg issued on 31/5/2013 of the Prime Minister and the action plan accompanying this decision.
The functional agencies in charge of the content of the project are responsible for managing and coordinating with the relevant agencies and organizations to achieve the goals on time and efficiently in accordance with the tasks of the action plan.
The Inspection Agency of Banking Sector is the focal point in coordination with other functional agencies, organizations and units to advise and assist the Governor in the implementation, monitoring and evaluation and supervision of the action plans to meet the deadlines. At the same time, the agency will guide and supervise the functional agencies, organizations and units to implement the action plans, to make reports to the Governor on the progress, achievements, difficulties and problems of the implementation process and propose solutions attached to the report to the Prime Minister. Besides, the agency timely detects and proposes to the Governors to report to the Prime Minister for solutions, which is beyond the authorization of the State Bank of Vietnam.
According to the most recent statistics of the State Bank of Vietnam, the NPL ration as of May 5 2013 is at 4.65 percent. The NPL of group 5, which bear the risks of irrecoverable debt, is increasing and accounting for high proportion of the total outstanding credit of the banking sector. This led to an increase of the number of the bailouts for credit losses from VND64,200 billion in 2012 to VND71,700 billion at the end of May 2013. This amount accounts for VND7,500 billion.
Because of increasing bad debts while credit growth has not improved, the banks are afraid of not reaching the targets. This leaves many banks hesitant to pay dividends to the shareholders, instead keeping the profits in case of risks. However, according to many experts, this solution is not enough to solve the problems of bad debts.
According to Dr Tran Du Lich, a member of the National Advisory Council on Financial and Monetary Policy, the banks have actively handled the bad debts but the measure is still provisioning. The establishment of the Asset Management Company of the credit institutions in Vietnam is considered as a new driving force for handling bad debts of the banking sector; nevertheless, the Asset Management Company is just a short-term solution, not solving all the problems related to the bad debts.
It is noted that by many ways, many bad debts of the banks were not classified as bad debts. The loans are classified into five groups; only group 3, group 4 and group 5 are considered the NPL groups. But thanks to restructuring, the businesses’ debts are rescheduled so group 3 and group 4 are promoted to group 2. The bad debt is reduced significantly, but the nature of the debt cannot be improved. This problem is now mentioned specifically by most of the banks. And now there is not specific number of the losses. Therefore, it is difficult to know the absolute value of the bad debts and this worsens the bad debt situation.