|A Mekong Bank staff introduces its services to a customer. The central bank has said new rules on debt classification will take effect in June 2014, ending a year-long extension. — VNS Photo Truong Vi
HA NOI (VNS)— The State Bank of Viet Nam will not further delay enacting Circular 02/2013/TT-NHNN on debt classification and will enforce it as scheduled on June 01, 2014.
According to SBV deputy chief inspector Dang Van Thao, last year the central bank delayed enforcing Circular 02 for one year to help businesses get easier access to bank loans and give credit institutions more time to prepare the roadmap and conditions to fully apply the provisions of the Circular.
Circular 02 strictly regulates asset classifications, the levels and methods of risk provisioning and the use of provisions to handle risks in the operation of credit institutions and branches of foreign banks.
Earlier, leaders of some banks expressed the view that the application of Circular 02 in June 2014 means businesses will continue to be tied up and massive bad debts will be incurred.
To prepare for enactment next year, SBV has asked banks to calculate how non-performing loans (NPL) will increase when applying this Circular to have specific plans for risks.
Thao said that SBV's Inspection and Supervision Agency will next year propose to the SBV Governor to classify NPLs into 3 groups.
The first group consists of businesses that have gone bankrupt or liquidated without the ability to recover debts. In this case, banks will use provisions to clear the debts.
The second group consists of businesses that are in difficulties. This group needs banks to restructure debts and lend more funding, along with rescheduling debts and reducing interest payments.
The third group consists of businesses that have been bankrupt or liquidated, but have collateral. In this case, banks will be able to sell the collateral to recover debts.
Banks will also be allowed to set up an Auction Council to liquidate and sell assets more quickly.
The grouping is planning to be directed towards credit institutions to help handle the expected increase in NPLs after the enactment of Circular 02.
Interest ceiling remains
The central bank will continue to apply the interest rate ceiling on dong deposits next year to stabilise market interest rate levels, said SBV's Monetary Policy Department head Nguyen Thi Hong.
SBV will actively and flexibly regulate interest rates to control and supervise market interest rates, along with monetary and macroeconomic developments, especially inflation, contributing to stabilising the currency market.
It will also actively use tools to enforce monetary policies to control inflation, stabilise the economy, support economic growth at a reasonable rate and ensure safe liquidity for credit institutions.
The central bank will also closely watch exchange rates, foreign currency markets and balance of payments to create suitable management policies, in a move to raise foreign exchange reserves and avoid the dollarisation in the economy, Hong said. — VNS