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State funds for bank debts bashed

Update: September, 21/2016 - 09:25
A proposal to use State funds to settle commercial banks’ bad debts, as stated in the draft plan on economic restructuring for the 2016-2020 period, has been met with a cold shoulder. — Photo thoibaotaichinh.vn

HÀ NỘI – A proposal to use State funds to settle commercial banks’ bad debts, as stated in the draft plan on economic restructuring for the 2016-2020 period, has been met with a cold shoulder.

Under the plan drafted by the Ministry of Planning and Investment, the feasibility of the proposal is to be studied by the Ministry of Finance and State Bank of Việt Nam. Authorities will have to submit a relevant resolution to the National Assembly for approval next year.

Deputy Chairman of the National Assembly’s Economic Committee, Nguyễn Đức Kiên, said State funds should not be used to deal with bad debts at this time as the money must be used to address other prioritised problems.

"Bad debts are not the State’s fault but stem from the commercial banks’ wrongdoings so the banks must take responsibility for their operation," he said.

“If they cannot solve the problem, they must file for bankruptcy. The Government only interferes to ensure the stability of the financial and banking market and maintain the interests of depositors,” Kiên stressed.

In fact, State money funds have been granted to the State-owned Việt Nam Asset Management Company (VAMC) to settle bad debts. Last year, the Government decided to increase the company’s charter capital to VNĐ2 trillion (US$89.7 million) from VNĐ500 billion and allowed the company to buy debts by issuing special bonds.

VAMC Chairman Nguyễn Quốc Hùng affirmed that the company did not need more money now. Instead, it needed more power to settle the bad debts. He agreed that it was not feasible to use State funds with the budget being overspent.

Debt settlement is estimated to range from VNĐ5 trillion to VNĐ10 trillion.

Expert Bùi Trinh said that since the State budget comes from tax collection, the Government should not let the people pay for what they do not owe.

Many experts agreed that supplying more money was only a temporary solution, while the more important one was to build a debt market and empower the VAMC to sell collaterals.

Nguyễn Trí Hiếu, a banking expert, told bizlive.vn that Việt Nam still did not have a debt trading market in the true sense of the word.

The VAMC, a State company, buys bad debts and pays in special bonds, Hiếu said, adding that “VAMC just serves as the ’parking lot’ for bad debts.”

“We need to build a transparent debt market, where banks sell bad debts and receive cash,” he suggested.

Hiếu said to date, VAMC had bought bad debts at book value. But if buying bad debt with money from the State budget, the price must be the market price, or the real value of the debts, which might be much lower than the book value.

In order to truly solve the problem, bad debts must be bought at real value and commercial banks must suffer losses, he said.

Regarding the empowerment to VAMC, Kiên from the NA’s Economic Committee said that members of the National Assembly Standing Committee were discussing amendments to the Law on Asset Auction, which would allow the VAMC to auction off asset collaterals without any intermediary.

The State Bank of Việt Nam said the bad debt ratio of the banking system by the end of June 2016 was 2.58 per cent, which was 0.25 percentage point lower than May but higher than the 2.55 per cent of late 2015. – VNS

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